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It is true that the higher auction prices for land are, the more revenues the state budget earns. However, there are concerns that these auctions could be exploited to create artificial land price bubbles, leading to profiteering and market disruptions that harm genuine buyers.

After nearly 20 hours of tension, at 4:30 a.m. on August 20, 2024, the auction of 19 land lots in Long Khuc area (Tien Yen Commune of Hoai Duc District in Hanoi) ended with record high winning prices of VND97.3 million – 133.3 million (US$3,905 – 5,350) per square meter compared to the initial one of VND7.3 million ($293) per square meter.

Deputy Director Nguyen Chi Hieu of Hoai Duc District Land Fund Development Center attributed these high prices to the prime location of the lots because almost every plot has two frontages. Therefore, as opposed to the land prices in neighbouring communes of An Thuong, An Khanh, and Van Canh, these are not high at all.

However, experts have raised concerns about potential collusion among bidders and the creation of artificial price bubbles. To prevent this, the authorities employed a multi-round bidding process. Bidders were required to participate in at least six rounds, and the deposit to participate was set at around 20 percent of the starting price, at VND109-172 million ($4,375 – 6,900) per lot, plus each price step being VND6 million ($240) per square meter.

Similar trends were observed in Thanh Oai District, where an auction for 68 lots at Ngo Ba area (Thanh Than Village of Thanh Cao Commune) attracted 1,600 participants and saw winning bids multiple times the starting price even though the location of these lots is not prime regarding infrastructure and traffic system.

The surge in land auction prices in Hanoi has significantly boosted local government revenue. Hanoi Statistics Office informed that the total budget revenue in Hanoi by the end of July 2024 is estimated to reach over VND337 trillion ($13.5 billion), an increase of 24.7 percent over the same time in 2023. Notably, land use fees amounted to nearly VND17 trillion ($682.3 million), 4 times as high as the one in 2023.

However, experts warn that this could be a sign of speculation and market manipulation. For instance, right after the end of the auction for land plots in Long Khuc area above, several real estate agents resold them at a gap of VND300-500 million ($12,000 – 20,000) per lot. Similarly, in Ngo Ba area, resales saw markups of VND400-600 million ($16,000 – 24,000) per lot. Nevertheless, just over a week later, many of these price gaps have decreased to between VND80-150 million ($3,200 – 6,000).

Real estate experts have expressed concerns about this rapid price fluctuation, suggesting that it could be a result of speculative activities. Nguyen Tuan Xinh, a research expert at Thien Khoi Real Estate Co., believes that some investors may be intentionally driving up prices at auctions to create a new market benchmark, only to later sell at a profit.

Assoc Prof Dr Dinh Trong Thinh, a senior lecturer at the Academy of Finance, agrees that the high auction prices of up to VND100 million ($4,000) per square meter reflect a heated market, but then argues that they are inflated relative to the actual value of the land and surrounding infrastructure. He emphasizes the need for post-auction oversight to prevent negativities and irregularities in the real estate market while ensuring transparency in auction sessions.

Chairman Nguyen Van Dinh of Vietnam Real Estate Brokers Association noted that the significant price increases in Hanoi's real estate market, especially amidst economic challenges, are unusual. He warns that speculative activities could be artificially inflating prices and advises buyers to exercise caution and avoid impulsive decisions.