HCMC land fetches record $1 mln for 10 sq.m, ripple effect seen

Winning bids on four plots of land in the Thu Thiem new urban area in District 2 ranged from VND470 million to VND2.4 billion per square meter, 4-8.3 times higher than the Dec. 10 auction’s starting prices.

In the city’s downtown area in District 1, the current highest land price is VND1.5 billion per square meter.

Tran Khanh Quang, general director of real estate firm Viet An Hoa, predicted that the record price would trigger a new land fever. In the past, such land fevers were short-lived, but the new one may last longer because more land auctions are expected to be held in the coming time, he said.

Huynh Phuoc Nghia, a senior expert with Global Integration Business Consultants Company, said the high winning bids will encourage investors of real estate projects on Thu Thiem peninsula to review and increase their selling prices as well.

Higher prices of land, villas, houses and apartments on the peninsula will lift prices in neighboring areas in the short term, especially in Thu Duc City; and even across HCMC in the long run, he said. Before the auction, many people had predicted real estate prices in HCMC would rise by some 30 percent in 2022.

Nghia said many people were afraid that land prices were being inflated above their actual value. The price of high-end properties built on land that costs VND2.4 billion per square meter would surge to dozens of billions of VND for even one-bedroom apartments, many times higher than the current market price.

“The virtual land price will rob growth opportunities for industries that use space such as commerce and manufacturing, which is not beneficial and can even harm the economy,” Nghia said.

Le Hoang Chau, Chairman of the HCMC Real Estate Association, said after the land price record on Dec. 10, the concept of HCMC’s downtown area has officially changed.

People traditionally regard the downtown area as District 1 surrounded by Nguyen Hue, Dong Khoi and Le Loi roads, which has always had the highest land prices. With land prices on the Thu Thiem Peninsula topping that, the downtown can be understood as an expanded area that includes areas along either banks of the Saigon River, Chau said.

Potential land price hikes will pose big challenges to HCMC’s plans for stabilizing housing prices and could completely waylay them, he said, adding that the hikes will directly affect all segments of the real estate market.

In the immediate future, the price of luxury and super-luxury real estate segments will establish a new price level and the selling prices of the high- and mid-end segments will follow suit, he predicted.

In the two years that Covid-19 has impacted the city, almost no low cost housing project has been implemented, Chau noted. With higher land prices, input costs for low cost housing projects will surge, forcing investors to abandon this segment, he warned.