Yangon ponders real estate bubble!

As with other areas of Asia, concerns of a real estate market bubble has people in Yangon scratching their head in disagreement.

Many local residents are showing fear of a collapse, but experienced real estate brokers and construction companies are more intrepid in their outlook, according to Mizzima.

“The real estate market is the best option for profit making under current market conditions but people can buy real estate only when they have enough disposable money,” said a real estate business owner in Yangon.

“The real estate investment is better than the car and bullion market for profit-making,” he added.

Prices in the city core have reached new levels, especially properties on Anawrahta Road, Mahabandoola Road and Sule Pagoda Road.

“The properties in Sule Pagoda Road and Anawrahta Road can fetch up to 1 million kyat a square foot. But the actual price when the final deal is struck is around 700,000 kyat. So the actual price is in the hands of the buyers and sellers. Sometimes the buyers give a calling price when they like the property. So there is no stable and reliable market price for these properties,” a broker in Minglataungnyunt Township said.

Price is dictated by demand, and the six busiest townships are Kyauktada, Latha, Pazundaung, Lanmadaw, Pabedan and Botataung. Prices and demand are highest in Kyauktada and Pabedan, and have proven attractive for businesses and shops at street level.

The last five year has seen rising prices in ground-floor flats with current prices of 30×60 foot flats between 250-400 million kyat, but few of these properties are actually for sale.

Meanwhile, properties in Pyi Road and Kabaraye Pagoda Road has seen some of the highest-priced transactions, with prices between 300,000 to 500,000 kyat psf.

Yet, an impending change in August of the Property Tax Law made for a sluggish market in early June.

Before 2007, 50 per cent of a property’s price was levied as profit tax, yet after 2007, it was changed to 12 per cent for properties above 5 billion kyat of property price and 15 per cent for real estate below 5 billion kyat, the Internal Revenue Department announced.

Under the protection of this law, money launderers entered the real estate market and bought many high-priced properties.

“Since 2008, the price of real estate has skyrocketed. After the gem emporium, the Chinese-Shan bought properties by paying the calling prices without bargaining if they liked them. Then the calling prices became market prices later,” a seasoned real estate broker said.

Land prices for big plots along Pyi Road and Kabaraye Pagoda Road rose to 500,000 kyat psf from 100,000 kyat. The plots on the lanes along these two roads can fetch half of that price.

“A Chinese-Shan bought many plots near the former gem museum in Mayangon Township and then many people also bought these plots which made the prices of the properties double in a short time span. Many bought the properties by paying the calling prices and then they became the market price, which fuelled rising prices for all properties,” said a retired government employee in Mayangon Township.

Similarly, some plots on the outskirts of Yangon such as 40×60 foot plots in North Dagon Township are also in high demand and they can fetch good prices, local residents said. Previously, the plots along the Panglong Road in South Okkalapa Township near Bailey Bridge could sell for 40 million kyat, but can now go for over 100 million kyat, said brokers.

“The prices rose due to good communication. Most of the main roads are occupied by businesses. Now you cannot buy these plots. There are no sellers for these plots. They are full of shops and businesses along this road from Bailey Bridge to the junction of the Township Administrative Office,” a real estate firm owner said.

People are in a “wait-and-see” mode now on the change of the Property Tax law, which will expire soon. It could be either renewed or terminated. Some worry about the collapse of the property market as many people can enter the market now with the low tax rate of 15 per cent. Some speculate that the rate will be increased by 10 per cent.

Some assume the property market bubble will burst soon but a noted construction business firm owner said that the current prices for real estate in Burma are not as high as property market prices in most Asean countries, such as Thailand, Cambodia, Vietnam and Singapore.

“The property price in downtown Singapore is much higher than in Yangon. In Vietnam too, the price is nearly US$20,000 for each square meter (3.3 sqf). In Yangon, the highest price is just around US$1,000,” he said.

The government has sold many state-owned properties by auction and tender but it made no significant impact in the market because they were at high prices. The Padomma Theatre owned by the Ministry of Culture in Sanchuang Township was sold at 500 billion kyat by tender in February of this year.

Observers said that the two successful bidders for the plot have had difficulty in paying the bidding price and they are considering surrendering the plot to the government.

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