Unity real estate agents go over property listings at the company’s office at Aung San Stadium in Mingalar Taung Nyunt township, Yangon. Pic: Lwin Maung Maung

A MOVE last month to reduce taxes on property sales has had the desired effect of injecting new life into the long-stagnant market, Yangon real estate agents said last week.

Agents said sales have been increasing on an almost daily basis since the Ministry of Finance and Revenue announced on August 12 it was slashing taxes from 50 percent of a property’s sale price to either 15pc or 12pc depending on its valuation.

“The government’s initiative has contributed to increasing sales,” said U Zaw Zaw, marketing manager for the Unity real estate agency.

The ministry had introduced the tax cuts by informing government officials rather than the market directly.

“At first, people thought it was just a rumour and they were hesitant to buy homes during that transitional period,” U Zaw Zaw said, adding that despite the hefty reduction in sales tax people still found it difficult to buy homes due to other expenses and the absence of a mortgage market.

“People don’t want to take a risk on buying property while spending power is decreasing. So they take every detail into account beforehand.”

U Than Oo, managing director of the Mundine real estate agency, said the tax reductions had most clearly lifted the market for more expensive homes.

“Sales of upmarket properties have been stagnant for a long time,” he said, noting that in the past few weeks he had seen properties sold in which there had previously been very little interest.

“However, the new (tax) scheme isn’t having much impact on the main market of apartments and condominiums priced between K30 million to K50 million,” he said, pointing out that sales taxes never applied to buyers of these properties without land because developers of apartment blocks paid the taxes when the building was completed.

“They don’t need to be legally registered with the government and deals are done through contracts recognised by local peace and development councils. As such, they don’t get taxed and the tax reduction has no impact on them,” U Than Oo said.

U Zaw Zaw said houses in Bahan and Mayangone townships priced around K100 million had attracted the greatest increase in interest among Yangon homes.

“They have been the most sought after in the market lately and the reason for this is the tax reduction,” he said.

Both agents said home prices were increasing now that sales were picking up. They estimated values to have risen by about 20pc from mid August.
Both also predicted prices would continue rising, mainly driven by a supply shortage rather than any previous undervaluing of properties.

“With demand increasing, people think they can get a better price for their homes and are now asking for more,” U Zaw Zaw said.

U Than Oo said that for the past two or three years there had been a decline in willingness and ability to invest in property.

“Now the market is receiving more and more investors every day,” he said.
“Where does the money come from? In fact, some people have money earned from several kinds of businesses and they haven’t dared spend a large amount in a single deal.

“Now, according to the announcement, they can spend as much money as they want in the property market, paying 12pc or 15pc tax,” U Than Oo said, referring to a clause in the August 12 announcement that requires homebuyers to declare that funds used to purchase a property were not earned through illegal trading, rather than provide evidence that this was not the case, as previously required.

“These people don’t care about prices, so prices are up.”
U Zaw Zaw said people were also turning away from car, gold and currency investments due to fears their values could soon be eroded.

“People have been selling these things and keeping the money without knowing what to do. The announcement has now encouraged them to invest in property,” he said.

Sales have also been fuelled by people waiting for the chance to sell their upmarket homes and move to more affordable housing. The tax reduction has helped this to happen, U Zaw Zaw said.

U Than Oo added that earnings from jade and gem emporiums in Yangon in July and August had also injected cash into the market.

“I have seen some of that money channelled into the property sector as property is considered the hottest investment now,” he said.

Agents said detached houses priced K100-300 million in Bahan township were the most sought after, followed by those in Mayangone and Yankin townships.