RANGOON — Skyrocketing land values in Rangoon will be capped by the government starting next month, Rangoon Division officials announced this week.
The division’s Committee for Properties said this week that it set caps for land values in Burma’s commercial capital and surrounding townships that would go into effect on Oct. 1.
The land values—calculated per square foot as assessment rates—will be set street by street, rather than township by township, as they were set in the past.
Thirty-eight townships in the division will be covered, including 33 townships under the jurisdiction of the Rangoon municipal administration.
The new assessment rates will be used to determine property taxes.
According to the tax system, which was revised last year, property buyers pay a tax equivalent to 37 percent of the assessment rate, while property sellers pays a tax equivalent to 7 percent.
The highest land values are in Bahan Township, known locally as the Golden Valley, where many Burmese tycoons own homes. Land values will be capped at 325,000 kyats (US$350) per square foot in the township, with a minimum rate of 35,000 kyats ($40) per square foot.
Other expensive townships are Dagon, Mayangone, Kamaryut, Hlaing and Sanchaung, with a land value cap of 275,000 kyats per square foot. The six downtown townships—Latha, Lanmadaw, Pabedan, Kyauktada, Pazuntaung and Botahtaung—come next, with a cap of 240,000 kyats per square foot.
Land on main roads is valued higher than land on small streets.
The government also announced caps for condominium values. Condominiums on main roads in commercial areas will be valued at 90,000 kyats to 100,000 kyats per square foot, with a cap of 150,000 kyats per square foot. Condominiums on smaller streets will be valued at 75,000 kyats to 85,000 kyats, with a cap of 140,000 kyats.
In residential areas, condominiums on main roads will be valued at 65,000 kyats to 75,000 kyats, while condominiums on small roads will be valued at 50,000 kyats to 65,000 kyats.
Land prices in Rangoon have soared since 2007, when another revision to the country’s tax system saw property taxes significantly reduced from 50 percent to 15 percent. After assuming office in 2011, President Thein Sein’s government began introducing a raft of economic reforms aimed at attracting foreign investment, spurring a further rise in Rangoon’s land prices.
In some areas, market rate land prices are now more than 10 times higher than before the 2007 tax system change. The city’s main commercial area—Kyauktada Township—has seen prices skyrocket to about 1.5 million kyats per square foot over the past five years.
Land in residential areas such as Bahan Township and along Pyay Road was valued at market rates between 500,000 kyats and 800,000 kyats, according to real estate reports. That compares to the government’s new assessment rate cap of 350,000 kyats along Pyay Road.
“This is the first time the government has announced fixed prices for taxes street by street,” Than Oo, a Rangoon-based real estate expert, told The Irrawaddy. “The government fixed prices township by township in the past, but now it’s attempting to control the prices by collecting tax.”
Demand for property in Rangoon—which was rising quickly over the past couple years—has become stagnant since the government announced it would fix land prices in the division, real estate industry sources say.
Kyaw Thu, a Rangoon-based real estate agent, said he expects property prices to drop over the next couple years, as developers continue to build, but he is skeptical that the government will be able to control the market for land.
“I expect that apartment prices will be down in 2015—some more construction projects will be finished at that time,” he said. “But land cannot be imported from abroad, so land prices will be as usual.
The Rangoon Division Committee for Properties set the new land value caps with the Rangoon municipal administration, the Internal Revenue Department, the General Administration Department under the Ministry of Home Affairs, the Myanmar Police Force, the Ministry of National Planning and Economic Development, and the Department of Land Records under the Ministry of Finance and Revenue.