Much public attention has been focused in recent times on land auctions in Hanoi’s suburban districts, marked by large registration volumes, extended bidding durations, and winning bids perhaps ten-times or more the starting price. State management agencies attribute this primarily to “speculation” and “price inflation”. Despite intervention from relevant authorities, the nature of these auctions has not altered, and winning prices continue to head ever-upwards.

Negative impact

The Ministry of Construction (MoC) has said that land auction prices reaching multiple times the starting price inflict a host of negative effects on the market.

First, high auction prices are used as reference points to set new, significantly higher price levels for nearby areas. This benefits projects that have been allocated land and paid fees, but creates a disadvantage for approved projects that have not yet made these payments.

Second, high winning bids affect investor sentiment, leading to price increases in existing and soon-to-be-listed properties near auction sites. Land auction prices often set the base for organizations and individuals in regard to buy, sell, and transfer prices.

Third, rising land prices raise input costs, driving up housing and real estate prices. Businesses find it challenging to invest in affordable projects and may be pushed towards luxury real estate targeting high-income buyers, which further curbs the ability of low to middle-income residents to buy homes.

Fourth, excessively high land prices prevent businesses and investors from preparing feasible investment plans, discouraging construction investment in the area and limiting future supply.

And fifth, unusually high winning land auction prices complicate land acquisition, compensation, support, and resettlement for projects involving defense, security, and socio-economic development. This situation could incite landholders who have or haven’t received compensation to demand amounts beyond approved plans, potentially leading to social instability.

Need for clampdowns

The MoC highlighted three main factors influencing recent land auction results: low starting prices attracting many participants, low deposits, and speculative activity. Brokers and intermediaries have been inflating prices by setting artificial baselines and manipulating demand, exploiting the public’s lack of market knowledge and crowd-driven investment behavior.

“These individuals are uncertified freelance brokers with limited legal knowledge and weak business ethics, leading to opportunistic dealings that inflate prices far above actual value, manipulating the market and undermining transparency,” said Deputy Minister of Construction Nguyen Van Sinh.

At the eighth session of the 15th National Assembly, Minister of Natural Resources and Environment Do Duc Duy explained that recent inspections found that many auction participants are not interested in owning the land but are instead engaging in speculative behavior. Through price manipulation, they inflate values to resell or establish high price baselines. In some cases, successful bidders delay payment or abandon deposits if the market doesn’t respond favorably. Additionally, some localities use outdated land prices, far below market value, as starting bids, creating a significant gap that draws speculative participants.

Mr. Nguyen Van Dinh, Chairman of the Vietnam Association of Real Estate Brokers (VARS), believes these unusually high auction prices are driven largely by very low starting prices. Under prior regulations, starting prices were set by hired consultants. However, recent amendments now use a “K coefficient” based on city Land Price Tables, leading to lower starting values and attracting thousands of bidders with only modest deposit requirements.

However, he also pointed out that land prices in low-infrastructure suburban areas now match those in prime urban zones, signaling speculation. Many participants, experienced in auction flipping, buy only to resell immediately or abandon deposits if market conditions turn. A more concerning trend is “land fever”, where participants intentionally set high winning prices to create artificial baselines, allowing them to drive up surrounding land values for profit. “While authorities ensure auction transparency, they cannot intervene in market pricing,” Mr. Dinh added. “In a free-market economy, transactions are voluntary, and participants can abandon deposits without penalty. Labeling such actions as ‘speculation’ or ‘price manipulation’ remains subjective without legal grounds to prosecute.”

Current regulations impose only minor penalties on bidders who fail to pay within 120 days, forfeiting low deposits. Revised auction laws will add restrictions but are only set to take effect from January 1, 2025.

Stronger regulations needed

Given the current market situation, Mr. Dinh suggested that even with upcoming regulatory changes, the high demand and intense competition in Hanoi’s real estate market will likely keep driving new record prices at future auctions. Speculative behavior, “FOMO” (fear of missing out), and expectations of rising real estate values continue to influence participants. This trend is further fueled by anticipated updates to local land price tables, which may indirectly contribute to higher land prices.

To ensure fair and transparent land auctions and minimize cases of speculation and price manipulation, Mr. Dinh highlighted four key points.

First, auction organizers should rigorously ensure that all auction processes fully comply with current legal regulations.

Second, government agencies need to monitor auction activities closely and respond quickly to any signs of market instability. New policies, stricter regulations, and penalties for deposit forfeiture should be introduced to encourage participants to carefully consider potential gains and risks, curbing speculative behavior through auctions.

Third, authorities should introduce stronger controls on cases where auction winners resell properties shortly after winning.

And fourth, the critical issue remains limited housing supply. Proactive measures are needed to unlock this supply, with the most immediate being the removal of legal barriers affecting various projects. As supply meets demand, market prices, including auction values, will more closely reflect the actual worth of real estate.

To improve sustainable land auction practices, officials from the Ministry of Natural Resources and Environment and the MoC have urged local authorities to strictly enforce the Law on Asset Auction, the Land Law, the Law on Prices, and related regulations. Transparency in land use, urban planning, and local price adjustments should be priorities in auctions, along with shorter payment deadlines for successful bids.

Authorities further emphasize the need for affordable housing and land prices that align with the purchasing power of most citizens. To prevent market manipulation, they advocate for increased inspections, the public disclosure of abandoned high bids, and strong enforcement of penalties for legal violations in land auctions.