The one thing keeping Myanmar real estate from blossoming is…
The one thing keeping Myanmar real estate from blossoming is…
Hint: It’s not a cyclone
Sky-high levy by the Myanmar government on property transactions has had a chilling effect on real estate activity and even encouraged tax evasion.
Desperate buyers are reportedly gaming the government’s tax registration system via powers of attorney, enabling them to sidestep the exorbitant fees on property sales, The Myanmar Times reports.
“Tax increases have also impacted the construction sector,” according to U Kyaw Kyaw Soe, associate secretary of Myanmar Construction Entrepreneurs’ Association.
Myanmar’s 2016 Union Tax Law was enforced in April with transaction fees on real estate sales starting from 15 percent and going as high as 30 percent – a five-fold increase from last year.
The Myanmar government had reduced property fees to 3 percent last year in an effort to encourage purchases.
Without the high taxes, the cost of owning real estate in Myanmar is already prohibitive due to high land prices. Annual office rents in Yangon are said to be more expensive than Manhattan.
More: Myanmar to grow the fastest in Asia-Pacific this year
Myanmar currently has no central registry system for documenting land owners, a function of either the Yangon City Development Committee or the Department of Human Settlement and Housing Development under the Ministry of Construction.
Meanwhile, the country’s banking system is severely undercapitalised, with buyers more likely to snap up property with cash rather than mortgage.
These and other factors have led to a glut in Yangon apartments. Unsold stock amounted to 6,654 units last year, twice that of 2014, according to Colliers International.
Property developers are now pinning their hopes on the recently passed Condominium Law, which has finally allowed the sale of Myanmar apartments to foreigners.
Overall, Myanmar’s economy has never been better off. The kyat has become Asia’s top-performing currency this year so far and time will tell if the property sector will further benefit from it.
Read next: Finalists for Myanmar Property Awards 2016 unveiled
Source: Property Report