The Myanmar government’s exorbitant levy on property transactions has had a chilling effect on real estate activity. In some cases it has also encouraged tax evasion with buyers trying to circumvent the government’s tax registration system via powers of attorney. According to the Myanmar Times, this enables them to sidestep the large fees on property sales.
“Tax increases have also impacted the construction sector,” U Kyaw Kyaw Soe, associate secretary of Myanmar Construction Entrepreneurs’ Association, noted.
Myanmar’s 2016 Union Tax Law went into effect in April with transaction fees on real estate sales starting from 15 percent and going as high as 30 percent. This is a five-fold increase from last year’s taxes.
The Myanmar government reduced property fees to three percent last year as it looked to encourage purchases. The cost of owning real estate in Myanmar can be unpalatable to both locals and foreign investors because of the high land prices found in the country. Annual office rents in Yangon can be more expensive than Manhattan in certain locations.
Another issue troubling the Myanmar property market is the lack of a central registry system for documenting landowners. This duty is passed to the Yangon City Development Committee or the Department of Human Settlement and Housing Development under the Ministry of Construction.
The country’s banking system is severely undercapitalized meaning buyers are more likely to purchase property with cash rather than with a mortgage. These factors along with a few others have led to a backlog of apartments building up in Yangon. Unsold stock amounted to 6,654 units last year, twice that of 2014, Colliers International noted.
Property developers believe the recently passed Condominium Law might help the market. The new legislation allows Myanmar apartments to be sold to foreigners. Another positive is that Myanmar’s economy continues to perform well. The kyat is Asia’s top-performing currency this year and the property market might be able to benefit from the country’s strong economy.
This story was originally published on property-report.com and is reproduced as part of an editorial partnership between DDproperty.com and Property Report.
