Property prices skyrocket due to speculation and laundering

The most widely heard analysis is that Myanmar’s real estate and property market has been gradually rising based on two genuine factors.

One is the growing demand for housing due to ever increasing population in urban areas and the other is the government’s urban expansion and development of low-cost housing projects.

This generally ignores another major influence: the influx of black money into the property market, inflating prices and driving speculation.

“The main problem of our country is we cannot control black money which flows into the housing market,” said one business man from Hlaing Tharyar Industrial zone, who declined to be named.

“Another problem is that some local businessmen applied for industrial land and are doing nothing. Those cases should be handled effectively,” he added.

Before 2007, buying real estate came with a hefty 50 percent property tax. Later that year the taxation system was changed. Now there is a 15 percent levy and it is no longer compulsory to demonstrate the origins of ones income.

While this has made buying and selling land much easier, it effectively opened the window for money laundering and illegally gained capital to be invested in the real estate market.

Because of this, property prices have been steadily inching upwards since 2007 as the proceeds from drug trafficking, timber smuggling, illegal mining and gem trading all find their way into real estate.

Once a sleepy city, construction sites have become ubiquitous in most of Yangon.

Although foreigners are not legally allowed to buy property under the country’s laws and regulations, land has been purchased using the titles of Myanmar citizens. The authorities can take action if either Myanmar citizens or foreigners are found to be deceiving the law, but such laws a rarely enforced, further encouraging foreig investment in er to partake in Myanmar’s property frenzy.

However, much of the speculation is also due to urban expansion in Yangon and surrounding industrial zones, pushing up real estate prices in areas that were formerly farm land.

Take Dalla Township located across the Yangon River from the old city. When word got out that they were planning the Myanmar-Korea Friendship Bridge connecting the township by road to the main business district, prices quickly doubled.

“Because of bridge projects, not only property prices in Dalla and Kyimyindine townships but also Thanlyin were impacted. People were saying their thoughts. There is a bridge in Thanlyin already so it could be new one. It could be built at Dagon Seikkan to Kalawell. Another bridge would be at Shwe Linban to North Dagon,” said one real estate agent.

He explained that in Dalla a 40 by 60 foot plot used to sell at Ks 200 million and now had doubled. Land prices began rising three years ago when a Ks 30 million plot sold for Ks 140 million.

Most of the speculation is due to local government plans to expand Yangon city, which will include developing a number of areas between Thanlyin and Kayan townships, as well as building affordable housing in North Okkalapa, Shwe Paukan, North Dagon and Kyimyindine.

Often the speculation has led to the buying up of land by wealthy businessmen who then sit on it waiting for the opportune moment to either to sell it again or develop it.

Such speculation may not be healthy in the long run and is already scarring off investors who are attracted by the prospect of doing business in Myanmar.

Source: ELEVEN Myanmar

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