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Is the auction price of 2.4 billion VND per square meter of land in Thu Thiem unusual?

Posted by Khoi Pham on December 19, 2021

Expert Nguyen Van Duc said that the winning bid of 2.4 billion VND per m2 of land in Thu Thiem is unreasonable and unusual

Having more than 30 years of experience in developing housing projects in Ho Chi Minh City, Mr. Duc admits, the unreasonable and even unusual of the recent Thu Thiem land auction lies in the fact that the land price is 2.4 billion VND per m2 goes against the conventional business vision.

According to Mr. Duc’s calculation, with this amazing land price auction, based on a detailed planning project of 1/500 scale, the land plot has a total construction floor area of ​​90,000 m2, the land use coefficient is 8.95 times and the number of apartments is expected to be 570 units, it is expected that the selling price of apartments to ensure profitable business must skyrocket to 400-500 million VND per m2. This is a huge surprise price because it does not represent the house price at the time of auction (in 2021), nor does it have a basis to represent 2022 or the next couple of years.

Mr. Duc said that, at least for another 5 years or even longer, the market may be able to touch the threshold of half a billion dong per m2 of super luxury apartments on the basis of the land price of 2.4 billion dong per m2 in this peninsula opposite District 1. He said that currently, the price ceiling of apartments in Thu Thiem has only been recorded at 210-250 million VND per m2 in the most prime location, adjacent to the riverbank, opposite District 1.

And expert Nguyen Tri Hieu said the last auction of Thu Thiem land, which was set at VND 2.4 billion per m2, showed that the price movement was not consistent with market realities and showed signs of being pushed to an abnormal level. “In this case, the successful auction is the “unpractical” price with the manifestation of speculative factors, distorting the real estate market,” he said.

According to Mr. Hieu, there are 2 scenarios that will happen in this post-auction period

In the first scenario, the auction is successful according to the actual process and the auction winner completes all the prescribed procedures, including transferring money to Ho Chi Minh City. If this happens, record land prices will disrupt the structure of the real estate market.

The second scenario, the winning party gives up midway, will create a precedent to take advantage of the auction to cause market disturbances. Regardless of the scenario, the construction process of Thu Thiem new urban area faces many challenges.

Real estate market on Thu Thiem peninsula, Thu Duc city. Photo: Quynh Tran

Mr. Hieu warned that speculation or abuse of land would greatly affect the entire economy, causing incalculable harm. On the other hand, the real estate market affects many related industries and is an important link of the economy.

“According to the Vietnamese constitution, land belongs to the entire people and is managed by the State on behalf of the country. Therefore, the land management agency needs to comprehensively review housing prices in Thu Thiem, considering the winning bid whether it is reasonable or not, as well as monitoring abnormal manifestations, to prevent bad consequences for the real estate market and the economy”, Mr. Hieu recommended.

Meanwhile, the general director of a real estate company based in Thu Duc city said that the price of 2.4 billion VND per m2 in Thu Thiem is unreasonable because it is not commensurate with the young urban area and sparse density, few amenities like Thu Thiem today. This is the land price of about 10 years ahead of the market, which means it will take another decade for the land price of Thu Thiem to reach the level that has just been successfully auctioned.

The unreasonableness also lies in the fact that on the same day of the auction, with the same location of functional area 3 north of Thu Thiem, the winning plot of land at the auction was 2.4 billion VND per m2, the price difference was 2-5,5 times higher the land lots that have just been successfully auctioned are located next door. According to the price appraisal rule, the coefficient of difference due to outstanding factors in terms of location such as large road frontage, river frontage, proximity to commercial facilities, etc… is only 30-50% maximum.

“Although the auction has no regulations limiting the price ceiling, land is a special resource that directly affects the economy. Therefore, the State should have a legal barrier against prices by regulate the maximum price steps for each price cut, in order to protect the sustainable development of the real estate market”, this CEO recommended.

Mr. Huynh Minh Tuan, Brokerage Director of Mirae Asset Vietnam Securities Company also confirmed, 2.4 billion per m2 of land in Thu Thiem is really a very high price at the moment. However, this is a phenomenon where investors (auction winners) are paying more for the next 5-10 years.

Mr. Tuan said that it is difficult to predict whether the winning business will put down a deposit (a deposit of 20% of the starting price of the land plot) or not because if the deposit is removed, the business will bring nearly 30 million USD and throw it out the window.

Sharing with VnExpress, an auctioneer from the Property Auction Service Center of Ho Chi Minh City (Department of Justice) said that whether the business won the land lot price with the amount of 24,500 billion VND is too high or not is the story of the company itself participates in the auction. This person said that, surely, Viet Star Real Estate Investment Co., Ltd itself has calculated carefully before closing the price, because this is a project with an important position and meaning. Not to mention, the amount above is very large, up to tens of thousands of billion VND.

“The outsiders cannot conclude on behalf of the winning business that this is a bad decision or not. Before participating in the auction, they must have their own plans, it is difficult for businesses to clearly disclose it for the public,” this auctioneer stated.

However, according to the concerns of real estate experts, the real estate market on Thu Thiem peninsula in particular and Ho Chi Minh City in general is entering a new land fever and is facing a period of testing value after the shocking auction record of 2.4 billion VND per m2 of land. The risk of Thu Thiem new urban area prolonging the filling schedule and difficult to take off as quickly as expected is evident because of the fear of fever prices, land speculation and profiteering from land price inflation.

4 lots of ‘golden land’ in Thu Thiem just won the auction

Source: Cafef and VnExpress

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