Thursday, August 17, 2017

The sum of its parts: subdivisions band-aid solution

The skyrocketing price of land in Yangon is driving many would-be developers to subdivide the large blocks in elite residential areas, a trend industry players said ultimately does more harm than good.

Houses are seen on a subdivided plot along Kabar Aye Pagoda Road in Yangon. Photo: Zarni PhyoHouses are seen on a subdivided plot along Kabar Aye Pagoda Road in Yangon. Photo: Zarni Phyo

“Yangon’s property value has obviously excelled in the last two years, most notably in 2013,” Mya Pan Thakhin senior real estate agent Ko Min Min Soe said. “Along with property value, rents are increasing and because the rental value of land is so high, blocks are getting smaller as they are divided and sold or rented out.”

Subdivision first prominently became a Yangon property market feature in 2008, Ko Min Min Soe said. But after a change of government and an influx of foreign interest in the commercial capital, Yangon, demand for land was driven dramatically up.

Exclusive residential and diplomatic areas have been targeted by owners looking to make a windfall on subdividing.

Golden Valley, Bahan, Kamaryut, Dagon, Mayangone, and South and North Okkalapa townships have seen a surge in subdivided land in the last year, Sai Khun Naung Real Estate manager U Yan Aung said.

“Land in those areas is mostly between 5000 and 10,000 square feet [464 to 929 square metres]. Some of these blocks are then divided in half and sold,” he said. “But some are divided multiple times by owners trying to create a rental enterprise.”

In South and North Okkalapa townships, owners have reduced large property sizes into mini-blocks that are less than one-third of the original.

“There are people who have divided their land to 255-square-feet blocks from a 2400-square-foot block,” he said. “It is not happening equally, but driven by supply and demand from Yangon being the main place to do business.”

In Yangon, large land plots can go for anywhere between K100,000 and K300,000 per square foot, such as in Golden Valley, where the prices fall at the latter end of the scale.

However, uncontrolled subdivision could end up dragging these prices down as the rolling, lush residential suburbs become increasingly cramped and heavily trafficked due to subdivision, Yangon Heritage Trust director Daw Moe Moe Lwin said.

“There are areas in Yangon that are intended to be exclusive and in the British colonial time there were zoning laws that meant in some areas, for example the diplomatic areas, a block had to be at least half an acre,” Daw Moe Moe Lwin said, adding that there would also be maximum structure sizes per block to protect the leafy character of these neighbourhoods.

“But under the new updated municipal by-laws, they allow subdivision,” she said.

But controls on subdivision are either absent or not properly enforced leading to a situation where the reduction of elite properties to multi-storey, sprawling apartment complexes could delete the valuable character of these areas altogether.

“Uncontrolled subdivision will cause even the larger plots of land to lose value over time,” Daw Moe Moe Lwin said. By changing the valuable character of residential suburbs – exclusivity, privacy and a quieter residence – the monetary worth of the property also reduces.

In older or exclusive residential areas, subdivision is often the result of multiple children inheriting their family’s home. Each benefactor wants to capitalise on the asset, ultimately reducing the valuable property to a series of multi-storey complexes that occupy almost the entirety of the mini-blocks, removing – in some cases almost centuries old – vegetation.

Subdivision is also often used as a trick to avoid additional taxation, U Yan Aung said.

“When people don’t pay taxes to the government, on government granted land, it can open the prospect of repossession in the future, making it an untrustworthy long-term investment option.”