YANGON — Myanmar’s government is expected to introduce a new property tax system next month that will reduce tax rates, in particular for lower value properties. Realtors said the move will stimulate demand for the latter market segment, but warned that high-end property demand will remain sluggish.
A proposal for the new property tax was sent to Parliament earlier this month, which adapted the bill before sending it back to President Thein Sein, who is expected to approve it soon.
According to reports in state-owned media, the draft law would set a 3 percent tax rate for buyers of property valued at less than 50 million kyat (about US$51,000), 10 percent for properties under 150 million kyat and a 30 percent tax rate for real estate worth more than 300 million kyat (about $306,000). Sellers of property pay a flat 10 percent tax rate.
In addition, property sales in Myanmar are subject to so-called stamp duty for buyers, set at 5 percent of value in Yangon, Mandalay and Naypyidaw, and 3 percent in other cities.
Under the current system, introduced in 2012, buyers pay a flat 37 percent rate on property transfers, while sellers pay 10 percent.
“We expected that the new tax system will begin in April 1, so under the new system the low-cost properties will be in demand. We are not sure about high-end properties,” said Than Oo, managing director of Mandine real estate agency in Yangon.
He said demand for properties on the outskirts of Myanmar’s commercial capital Yangon, such as in North Dagon, South Dagon, North Okkalapa, Shwe Pyi Tha, Hlaing Tharyar, Dagon Seik Kan townships, was rising in anticipation of the new property tax system.
“Especially in remote townships, with properties valued between 50 million to 200 million kyat, there will be demand after Thin Gyan water festival [in mid-April],” he said.
The new government tax system is coupled to an improved property valuation method introduced in October. The new measure has contributed to rising property tax revenues allowing the government to lower rates.
The new valuation system found the highest property rates in Yangon’s Bahan Township—known locally as the Golden Valley, where many wealthy Burmese own homes—with an average value of 325,000 kyat ($331) per square foot.
Other expensive townships include Dagon, Mayangone, Kamaryut, Hlaing and Sanchaung, where land is value at 275,000 kyat. Latha, Lanmadaw, Pabedan, Kyauktada, Pazuntaung and Botahtaung townships come in at average of about 240,000 kyat per square foot.
Since the new valuation was announced property owners began to expect higher tax bills. As a result, Yangon’s property market has cooled, in particular for high-value properties, according to realtors.
Real estate prices have boomed in the former capital since Thein Sein’s government took over in 2011 and introduced a raft of economic reforms.
The new tax plan, realtors say, will keep downward pressure on high-end property prices, but make lower value real estate more attractive as tax on these properties will be significantly lower per April 1.
Zaw Zaw, manager of Unity real estate, said demand for expensive property had effectively stagnated since October. The new government property taxation system created “a burden for buyers,” he said. “So investors are looking to invest in low cost properties at Yangon, those valued under 200 million kyat are in demand in some remote townships.”
“I expect that the real estate market will be shaken again after the new tax rate changes,” Zaw Zaw said, before adding, “[But] market demand for high-end properties rate is going down.”
Source: THE IRRAWADDY Myanmar
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