Middle class and staff fall victim to property speculation

Property prices in some major locations have increased six-fold within five years due to financially powerful investors who are speculating in the real estate market either with their own financial resources or money they managed to inject into the market through various means.

Unreasonably high property prices have also exacerbated the housing problem of the middle class, company staff and factory workers, and have undermined the efforts for building low cost housing for them.

Owning an apartment in Yangon is just a wild dream

“Let alone buying an apartment of our own, apartment rents are as high as K 50,000 to K 60,000 per month. At this rent, we cannot hire a house at accessible location. To own an apartment is just a wild dream at a time when we have to try very hard just to pay the rent regularly. House rent is a burden for us. We have to pay house rent year by year. So we need to work hard all the year round to save enough money to rent an apartment at the end of the contract, and then, have to spend all our savings on house rent. We can’t still break this vicious cycle of working hard a whole year and paying rents,” said a company staff in Yangon.
“I earn K 150,000 monthly. We have virtually nothing after having paid for food and housing. To buy an apartment even at the current prices, I would have to save for about 20 years. We cannot even dream of owning an apartment,” said a senior staff from Hlinethaya Industrial Zone in Yangon.

Five hundred square-feet for three families

“At our apartment building, residents cannot afford to rent a single apartment for each nuclear family. So, all the extended families have to share an apartment. There are about two to three nuclear families in an extended family in an apartment. The apartment is only 40 feet long and 12.5 feet wide. This means that eight people including children have to share the space of only 500 square feet,” said a resident in Shwegon Yeikmon Housing Complex.

“In our housing complex, a family rented an apartment. Later, another family joined them to share it. The main reason is that they could not afford a whole apartment for each family. Even the rent for an apartment at the topmost level is about K 70, 000,” another resident in the apartment building said.

Speculators are the main culprits

In Yangon property market, the price for a 12.5x40 feet apartment at the second floor is at least as high as K 20 million although the actual construction cost for such an apartment is only K 5 million at current construction material prices. This is because of the skyrocketing land prices, according to construction entrepreneurs.

“If we are granted a contract to build an apartment building according to standards accepted in Yangon, we can build it at K 5 million per unit including our profit. However, in the inaccessible areas of the town, the price of an upper floor apartment is as high as K 20 million. So it can be said that land price for such an apartment costs about K 15 million. We can see clearly that apartment prices have risen considerably due to high land prices. What I mean here is that in order to provide apartments to the public at affordable prices, we need to consider an appropriate sale system and a way to control land prices,” said a construction entrepreneur.

“It is clear that land prices have risen due to speculations in the market. It is impossible to think of fivefold or six-fold increases in land prices without speculation. As a result of rising land prices, businesses cannot be expanded. Investment just for land necessary for business expansion is a substantial amount of money. Money laundering activities may involve in the market. The housing problem of the middle class and staff has worsened. So we need certain measures to control such undesirable affects. I think the taxation system may be effective in curbing the property prices. Otherwise, foreigners may grab land in the name of Myanmar nationals. At present, land is transacted at prices as high as tens of billions of kyats,” said a manufacturer.
 

During the five-year period from 2005 to 2011, land prices in some neighborhoods in Nay Pyi Taw rose about 100 times while that in Mandalay increased tenfold due to speculators.

A real estate agent in Mandalay said, “In 2005, people in downtown Mandalay sold their land at billions of kyats, and moved to emerging suburban areas where they could buy land at tens of millions of kyats. In 2011, there is no land left to be sold at downtown Mandalay, and land plots worth K 10 million in suburban areas in 2005 are now valued at hundreds of millions of kyats each.”

“Roughly speaking, land prices at downtown have risen more than tenfold, while that of emerging suburbs have increased five- to six- folds compared to the prices in 2005 and 2006. This means that land prices in emerging suburbs rose due to the demand from people who sold their land at downtown and moved to emerging suburbs. Now, it is impossible, however, for those who moved to suburbs to be able to afford to buy back land at downtown,” said a resident entrepreneur.

To curb speculation in the property market

To prevent its undesirable outcomes, property speculation should be curbed through taxation systems and laws concerned.
“Rising land prices should be controlled through higher taxes. So, tax reduction for property should not be extended further. In addition, illegal ownership of land by foreigners in the name of local people should also be prevented according to laws, if there are such laws,” said a developer.

Although land was acquired at tens of billions of kyats, only a few paid taxes at the actual purchase prices. As a result, the government could not collect more taxes from land transaction despite the rising property prices, according to the sources in the market.

“To control the rising property prices, it is required not only to raise the tax rate but also to collect the taxes according to the actual purchase prices. Although land was transacted at tens of billions of kyats, buyers paid taxes just for millions of kyat. Some land was changed hands without paying any taxes. If such problems can be handled properly, rising land prices can be controlled,” said a real estate agent.

Concerning the laws that should be considered by property speculators, a legal expert said, “Immoveable property means land, benefits from the land, building and things constructed or situated on that land and things installed on those buildings. No person shall sell, buy, give away, pawn, exchange or transfer by any means immovable property with a foreigner or foreigner owned company. Whoever contravenes the provisions shall be sentenced to a minimumof three years and a maximum of five years imprisonment and the relevant immovable property shall be confiscated as public property. No foreigner or foreign owned company shall acquire immovable property by way of purchase, gift, pawn, exchange or transfer. Offenders are subject to the same punishment. All these provisions are stated in the section 3, 4, and 11of The Transfer of Immoveable Property Restriction Act (1987).

In addition, no person shall grant a lease of immovable property, for a term exceeding one year to a foreigner or foreigner owned company, and no foreigner or foreigner owned company shall receive a lease of immovable property for a term exceeding one year. Whoever contravenes the provisions shall be punished with a fine not exceeding three times the rent agreed upon for the entire period of the lease and the relevant immovable property shall be confiscated as public property,” the legal expert added.

“It is said that some people in Mandalay managed to get two or three Citizenship Scrutiny Cards with the intention of speculating in the property market. When a person applied for residence registration, responsible authorities carefully examined all the requirements for it. They made sure that the previous residence provided for the new residence registration was correct, or that the person could speak Myanmar language or the person was a national race before approving the residence registration certificate. The same should be done now. All the residence registration certificates should be rechecked. Some people are using faked national registration cards for property speculation,” said a journalist.

To solve the housing problem for middle class people

Low cost housing projects as well as private banks play an important role in solving the housing problem of the middle class and staff members at current income levels who cannot afford to own an apartment at rising property prices due to skyrocketing land prices, according to entrepreneurs.

“At current property prices and current income levels, it is impossible for the middle class and staff to own an apartment. To help more people own apartments, construction of low cost housing projects is essential. The price of low cost apartments must be affordable for most staff at current income levels. I do not mean the so-called low cost apartments at K 20 million. Private Banks are the most important for low cost housing projects as the developers are required to cooperate with banks as to the price, standards and sale system of the apartments. This is because most staff cannot afford to buy apartments at K 6 or K 10 million as cash down. So, these apartments will have to be sold through installment systems with the help of private banks. Successful implementation of such projects largely depends on the amount of cash that banks can give out in loans and the interest rate,” said an entrepreneur from a construction group.

“Low cost housing projects were implemented once during the time of the Burma Socialist Program Party. Another low cost housing project recently was Yuzana Garden City. These were not different from other housing projects because the prices were not low, and there was no appropriate sale system that helped people to buy the apartments. So, the question is whether low cost apartments will be sold as usual or through a sale system adopted in Singapore. If the property sale system of Singapore is applied, the project will be successful. In this system, the installments for apartments are deducted from the monthly income of the citizen buyers. The project will be successful if it is implemented properly by amending the banking system and the current interest rate. The prices of low cost apartments should not be more than K 10 million, and that of a condo apartment should be less than K 50 million,” said an export-import entrepreneur.

“There are many bad consequences of not having own apartments. People have to try hard to pay the rent a whole year. After paying the yearly rent, they have nothing left for their future needs. If they have health problems, they face great difficulties to pay rents. As a result, most people cannot do anything for their future development. Something should be done to solve this problem. In addition to banks and construction firms, the government is also required to help with these projects. Such projects should be given priority and should be implemented as long-term projects,” said an economist.

Although property was speculated at tens of billions of kyats, these speculators evaded taxes. In addition, rising property prices worsened the housing problem of the middle class and staff, creating many bad consequences for them. To break free from the cycle of such consequences, low cost housing projects must be implemented properly with the cooperation of the government and the private sector with all seriousness.