The price of real estate in Myanmar’s commercial capital has been on the rise since 2007, when the former military government lowered the property sales tax rate to 15 percent. Political and economic reforms since 2011 have failed to curb the trend, with sky-high commercial and residential rental prices in Yangon pricing out many businesses and local residents.
Sai Khun Naung, the managing director of Sai Khun Naung Real Estate Company, spoke with The Irrawaddy’s Kyaw Hsu Mon on the outlook for the booming property market.
Q: What was your experience when you first entered the real estate market in Myanmar?
A: I started my business in 2002 with 20 staff and targeted only commercial areas in downtown Yangon. The Asian financial crisis in 1997 had some impact on the local property market, which then began redeveloping in the years 2000-01. But the market then was not as developed, compared to now. We only had a small number of clients at that time.
Q: How did real estate agencies like yours survive Myanmar’s banking crisis in 2003 (which began after more than a dozen deposit-taking financial firms collapsed)?
A: We were seriously impacted by the crisis in 2003. Many real estate agencies surrendered their businesses. But we survived because I had some clients in Shan State, my native state. At that time, many small financial groups had invested in the property market. After these groups folded, real estate agents like us were affected [as investor confidence plummeted].
Most people thought we were liars, so we had to really struggle hard to survive in the market. Money from some retired government officials was also involved in that crisis. They invested money in small financial groups like Ayeyar Myay, Thitsar Pankhin and Htoo Char. Now we no longer have these kind of small financial groups here. We are lucky. The property market has been reborn again, and we no longer have a bad name among the people.
Q: What are the main reasons property prices have been constantly increasing in Yangon?
A: The major problem is that the government eased property taxes in 2007, and then didn’t ask investors where their money came from. People say that Myanmar is the best place for money laundering. So some money has come from this source. People have realized that they will definitely reap the benefits if they invest in the property market. Demand and supply are not balanced.
Q: Can you confirm the highest land prices in Yangon? Is it true that some land is US$1,500 per square foot?
A: It’s true. Price depends on location. Land prices along some main roads in Yangon have reached that much, because of high demand. But now this is beginning to cool down as many wait and see how the political situation develops this year.
Q: Do you think the government’s new property sales tax system can help reduce land prices?
A: Taxes are not the only answer to controlling prices. If the government wants to reduce land prices, they will have to expand Yangon. A tax increase is just a cure for the short term. The government should try to expand not only Yangon but also Mandalay. Prices will definitely come down, like they did in the imported car market. People rely on Yangon for their businesses, that’s why people prefer to stay here. But there is a lack of new housing projects in Yangon. There are many vacant lands on which to expand projects, so we need better transportation too.
Q: Where are the most in-demand areas of Yangon at present?
A: There are many good locations in Yangon, including along the main roads—Kabar Aye Pagoda Road, Pyay Road and Waizayantar Road. The new popular areas include North Dagon Township, not so far from downtown. And also East Dagon Township, which the government should develop for the future. North Dagon Township is already developing into a commercial area. These areas will have potential on the market soon.
Q: How does the weakness of Myanmar’s banking system affect the property market?
A: There are no long-term loans for buying houses here. It is related to the political situation. Political instability is a major factor. People are fearful of when the property bubble will burst. Banks are also watching the situation with interest. As far as I know, banks may give loans at one-third of the property price. For example, if the price is worth 100 million kyat, they will loan 30 million kyat to the buyer. There are still many difficulties here, all related to the political situation.
Q: Will the real estate bubble in Myanmar burst soon?
A: My personal point of view is that it won’t happen soon. There is only a small amount of foreign direct investment coming into the country, and there is also no better investment to make than in the property market right now. A lack of new housing projects here is also a factor. I don’t see many people selling property at low rates; the market is still strong. Banks are also strong, that’s why it won’t happen until three to five years from now.
This article first appeared in the March 2015 print edition of The Irrawaddy Magazine.