RANGOON — The city’s hitherto skyrocketing property prices are expected to taper off next year while the continuing impact of high land costs will sustain an upward trend in residential and commercial rental costs, real estate experts have said.
Land values in Rangoon have risen dramatically since the former military regime lowered the property tax sales rate to 15 percent in 2007, with a significant boost since 2011 as a result of successive economic and political reforms instigated by the nominally civilian government.
Median prices for properties situated on Rangoon’s main roads have reached unprecedented highs ranging between 700,000 and one million kyats (US$680-970) per square foot, with Pyay Rd and Kabar Aye Pagoda Rd the most lucrative areas in the city.
“The highest land prices in Yangon reached about one million [kyats per square foot] in 2013, so I expect that they won’t be able to increase more than that in the next year,” said a senior manager from Unity Real Estate Services. “Prices will not fall but the market will cool down because landowners will wait until after the general election.”
A steep rise in the property tax to 37 percent last year failed to slow down meteoric rises, as buyers and sellers widely rorted the system by under-declaring land values.
In an attempt to prevent landowners from sidestepping their tax obligations, since Oct. 1 the Rangoon Division government has applied fixed values on property transactions based on official assessments of property values, with annual revaluations to start from next year.
Developers have made calls for higher rental prices for apartments across the city to match the property boom, including proposals for setting a floor price of 200,000 kyats ($US194) per month in downtown areas. Increased foreign investment and a shortage of suitable commercial space is also driving up the cost of commercial tenancies, particularly in highly-sought after areas of Rangoon such as Sanchaung, Kamayut and Mayangone Townships.
The Su Mon, manager of the Rangoon office for John W Hancock & Associates, said that increased rental costs are becoming a burden for foreigners seeking to invest in Burma and may eventually crowd out potential foreign residents.
“Some medium income foreigners are reducing spending because of rental costs. If a day comes when they can’t pay or there is not enough space for them, the real estate bubble will burst,” she said.
Maung Aung, an economist and consultant to the Ministry of Commerce, said it was imperative that the government solved land issues immediately before they became a substantial drag on the broader economy.
“Land prices in Burma are among the highest in Asia. This is a major issue for the government,” he said. “There will be trouble as more foreign businesses come into the country if the government doesn’t start solving this problem right now.”