Tax Scheme Slows Rangoon’s High-Value Property Market
By Kyaw Hsu Mon 2 November 2013
RANGOON — One month after Rangoon’s government introduced a new tax measure to cool an overheated property market, realtors say sales of high-end properties have slowed.
Land values in the commercial capital have risen dramatically since a lower 15 percent tax rate on sales was applied in 2007. Economic and political reforms since a nominally civilian government took power in 2011 have further boosted prices as the city awaits an investment boom.
A tax rise last year—to 37 percent—failed to curb rising prices, since buyers and sellers could easily declare low values for land being sold, and avoid paying tax on the bulk of a transaction’s real value.
But since Oct. 1, the Rangoon Division government has applied fixed values, varying street by street based on an official assessment, with in-demand areas and property on main roads given higher rates.
For example, anyone selling property on certain streets in the highest value area in the city, Golden Valley in Bahan Township, must now pay tax at 37 percent of a fixed price of 325,000 kyat (US$350) per square foot of land.
It was hoped that ensuring that a fair level of tax is paid would stop speculation, which had been driving up prices and making Rangoon a less attractive prospect for overseas investors.
Separate price levels are set for condominiums, with high rise apartments on some main roads valued as high as 75,000 kyat ($78) per square foot.
Than Oo, managing director of Manding Real Estate, said the division government’s intervention appeared to be working, as land sales and prices have been stagnant since the fixed rates were introduced.
In particular, he said, sales of high value property had ground to a halt.
“Rangoon’s highest value property market is not active, but land prices haven’t decreased because the government fixed the prices [for taxation],” he said.
A senior manager at Rangoon-based realtor Unity agreed that the market for high value properties—1 billion kyat ($1 million) and above—had dried up. However, he said the lower end of the market—referring to property prices between 10 million kyat to 100 million kyat ($10,400 to $104,000)—was still seeing sales.
“This is the impact of the fixed prices here. The highest-priced land had almost stopped in Rangoon, but for lower-priced land they are still buying,” the manager, who requested anonymity, said.
“Property prices used to keep going up, but now, people don’t want to invest in the highest value properties, especially on Rangoon’s main roads, because they have to pay fixed [and high] taxes.”
He also said that the move was having less of an impact in downtown, where the need for business space was keeping demand high.
Myat Thu Win, director of Shwe Mintha real estate, who agreed that the high end of the market had slowed down, said overall demand was still very high. This demand could fuel a boom in activity next year as construction projects—many producing mid-value properties and condominiums—are completed, he said.
“We are just focused on the demand rather than on high prices,” he said.