Rangoon Starts to Control Property Prices, but Rent Is Another Story

By Kyaw Hsu Mon 9 January 2014

RANGOON — Realtors say a new tax measure has successful cooled an overheated property market in Burma’s biggest city, with sale prices stagnating for high-end properties, but that rental fees have continued to soar.

In October, the Rangoon divisional government applied fixed values for properties to determine the amount owed in property taxes. Last month, realtors reported that property prices and sales had ground to a halt for properties over 1 billion kyats (US$1 million), although demand has continued for lower valued properties.

But even in high-value areas, rentals are a different matter. In commercial areas along streets such as Sule Pagoda Road, Kaba Aye Pagoda Road and Pyay Road, realtors say that at the start of 2014, rental fees are at their highest ever and have more than doubled since 2012.

“On Kaba Aye Pagoda road, the rental fee for an acre of land was 3 million kyats two years ago, but now it’s 12 million kyats,” Zaw Zaw, manager of Unity real estate agency, told The Irrawaddy on Thursday. “It’s because demand is still increasing.”

As has been a longstanding problem, supply has failed to keep pace. Since 2005, when development of the construction sector picked up in Rangoon, the number of new residential units in the city has increased by an average of 20,000 units annually, satisfying only about one-third of demand, according to a number of local realtors and construction developers.

“Demand and supply in Rangoon are not in balance, so rental fees are also increasing,” said Than Oo, managing director of Mandine real estate agency.

In commercial areas, space has become more coveted because many new car showrooms have entered the city since the government implemented a more liberal car import policy in 2012.

“Many car showrooms need a lot of land along the main roads, but space is very limited in Rangoon, so owners are asking for higher [rental] amounts,” said Zaw Zaw of Unity real estate agency. “I heard some car showrooms cannot afford to pay rent in this next year.”

Champion Construction Materials, a development company, pays 250 million kyats monthly for a showroom on U Wisara Road, but others have not been so lucky to find a spot, says company manager Khun Htoo. “Foreign companies are now looking for a good location for their businesses, but there are very few offices for them. That’s one factor why foreign investment has been delayed here,” he said.

“We need more office towers for the future, as well as residential apartments. But until 2015, land prices in Rangoon may continue to soar,” he added, saying he did not have confidence in the current government to fix the problem before the next general election is in 2015.

Rental fees are also soaring in residential areas, especially for high-end apartments and homes in townships downtown.

“Rental prices for two homes in one compound in Bahan Township have increased 20 million kyats monthly this year,” Zaw Zaw of Unity real estate agency said. In Bahan Township, where many Burmese business tycoons own homes, land values range from about 800,000 kyats to 1 million kyats per square foot.

“Mostly embassies and foreign businessmen used to rent these houses, but now most foreign business people are moving to condos or apartments,” he added.

Ma Mitchell, an Ahlone Township resident, said her family’s monthly apartment rent has more than doubled since 2012. “My apartment was on the sixth floor and I paid 50,000 kyats, but now that has increased to 120,000 kyats. We cannot afford that price, so we had to move into my mother’s house,” she said.

The Yangon City Development Committee (YCDC), the administrative body of Rangoon, plans to build more low-cost housing in outskirt townships to help balance supply and demand.

“The best way to reduce the property prices in Rangoon is to implement many housing projects here,” Toe Aung, deputy head of the YCDC urban planning department, told The Irrawaddy. “Now we have three [low-cost housing] projects in North Dagon and South Dagon townships.”

The YCDC’s low-cost apartments were being sold for about 20 million kyats each on privately owned land. “But people are saying it’s still expensive,” Toe Aung said.

To further reduce prices, he suggested building the housing on government-owned land. “We can’t sell any cheaper on privately owned land,” he said. “But on land owned by government ministries, apartments can be built and sold for lower prices.”