Yangon (Chindwin): Myanmar’s real estate industry has been a hard hit following the military coup d’état. Property experts are not expecting a market recovery soon but believe it will take at least two to three years to yield a slow recovery with all industries critically affected.
Retail, restaurant, and hospitality sectors have been most vulnerable to the crisis, with housing and property initially more resilient to the severe market shock.
The decline has started to accelerate since the pandemic’s outbreak and worsened by the political instability and oppressive military rule.
The investment in real estate development and businesses have been significantly down over the past one and half year.
Despite the crippling effects of the economic slowdown, the real estate market has started to pick up slightly in the last few days. It may be because the interim military council has announced reductions and reliefs of various taxes, including property and land taxes, in June 2021.
Century Condominium currently under construction on Innsein Road in Yangon.
The Law Amending Myanmar Stamp Act came into effect on 26 November 2019 to amend the number of penalties applicable to unpaid and underpaid stamp duties.
In an attempt to boost the real estate and property market, the so-called interim military council announced the tax deduction programs, allowing buyers and sellers to pay only 3% of the agreed price compared to 30%, which was imposed and levied on property deals in the past. Land and property tax has normally been subject to levy.
With the continued civil disobedience movement going strong, the military council has been slapped with the critical shortages of experienced staff, which has recently worsened by firing more than 5,000 staff.
The announcement on tax deduction means buyers and sellers have more freedom to fix the market prices out of the ad valorem rate and 2% of whatever market-clearing prices or values are levied on stamp duty.
Stamp duties are levied on conveyance and transfers of land and property, which are required to be paid by the buyers. However, there is no proper assessment of the land or house market value, which gives buyers or sellers a free choice to decide the lowest possible amount for the transactions as no valorem rate is available. Business analysts believe that this might be a trigger to encourage people to invest in property rather than gold and foreign currencies while enjoying tax reductions.
In mid-September, the Central Bank of Myanmar (CBM) announced a void of regular ad valorem rate in an approach to fighting for temporary halts of a depreciated rate of local currency Kyat against the US dollar.
Properties prices have already fallen gradually, and property experts anticipate this trend to continue in the following years due to the outbreak of civil war. The housing rental prices have fallen significantly to the lowest since 2015.
The depreciation of Kyats [Myanmar’s currency] is of another concern as its inflation rate could soon be out of control if the political turmoil continues unabated.
Despite the banks’ limitation on cash withdrawal for individuals and companies, the rise in demand for gold and dollar is a mystery. Gold making its price soaring is a surprise for many while it is difficult to withdraw money from the bank.
Despite the banks’ limitation on cash withdrawal for individuals and companies, the rise in demand for gold and dollar is a mystery. Gold making its price soaring is a surprise for many while it is difficult to withdraw money from the bank.
The Central Bank of Myanmar, the Myanma Economic Banks and all private banks are limiting the amount of cash withdrawal allowance for individuals with 5 lakhs (about 250$ per week, 1,000$ a month) and companies with 50 lakhs (about 2,500$ per week, 10,000$ a month). People have to wait in a long queue for hours to withdraw a limited amount of money from the bank, with many ending up getting zero but receiving nonsense excuses from the bank telling them that there is no token available nor money at the bank.
Amidst the hardship to withdraw the cash which is needed to buy the US dollars and golds that becomes scarce resources that customers are not able to purchase as they wish and demand. Buying by banking transfer required a top-up of 10 to 20% for properties and cars but golds are dollars are not sold by banking transfer.
The truth behind the mystery is that, managers or officers at the bank’s branches are selling cash with a certain percentage which is around 10% at present, sometimes it reached apex up to 30 to 40% some months ago as people tried every possible way to withdraw their own money by paying high percentage for services with which they are able to secure mostly gold, foreign currencies and property.
As of now, this volatile movement plays up the current market and investment.
The fungibility and liquidity of gold and dollar versus the property will likely remain strong while the country is in the perilous stage of a “failed state”.
