Municipal authorities have said the market remains gloomy and a number of land auctions have had to be postponed owing to a lack of interest, resulting in lower revenues. Some winners even forfeited their advanced deposits rather than take a piece of land at $5,000 per square metre.
In all, the city has been able to auction off only a quarter of land bank it initially wanted to sell.
Buyers, meanwhile, owe millions of dollars to the authorities. Revenue from auctions since 2003 should have be $330 million but the authorities have to date collected $147m. Winners of auctions in 2004 alone owe $74m.
For instance, Tay Ho district has been able to collect just a quarter of the total $18.6m in revenue since the beginning of the year.
Nguyen Dang Hung, vice director of West Lake Infrastructure Management Board, said businesses owe $18.7m from the purchase of a land plot in the area because infrastructure such as roads and water supply was not ready.
The Thang Long Veterinary Medical Company was supposed to pay $1.9m for 2,808 square metres of land it purchased last year but has paid only a deposit of $56,200, while Hong Lam Company owes $2.18m from an auction two years ago.
Bidders are not required to pay when infrastructure on auctioned land was never completed. Yet buyers are refusing to pay even when it is. Some analysts have blamed stagnation in the real estate market over the past two years and the reductions in land and home prices recently. According to the Pricing Management Department at the Ministry of Finance, land and home prices over the first six months of the year did not see much fluctuation and tended to decrease. Reports from 17 out of 51 provinces studied showed apartment prices have reduced as much as $60 per square metre, or $3,125 to $6,250 per unit. However, the department said the reduction was not due to investors lowering prices but to speculators who had to narrow the difference between the price they were selling and the original level set by developers.
“In such a context, developers of new apartment projects had to go all the length to boost demand through price reduction and promotion to quickly recover capital and pay bank loans,” one report stated.
No. 774/August 14-20, 2006