The latest luxury development in Yangon: At 34-storeys, the Diamond Inya Palace will be the tallest residential tower, and probably the priciest, in Myanmar when completed in 2016. PICTURE: Mandalay Golden Wing Holding Limited.
By Arno Maierbrugger
Gulf Times Correspondent
Sky-high property prices in Myanmar, which in the country’s commercial capital Yangon have reached or partly exceeded the level of New York, Tokyo or Hong Kong, are to stay until at least 2018, dampening hopes that the sector would calm down from its current overheated state. This was the core message of Moe Thida, Assistant Director of the Urban Housing Development Department of Myanmar’s Ministry of Construction, at a panel session at Euromoney’s Myanmar Global Investment Forum 2015 recently held in Yangon.
Staggering housing costs – both prices and rents for residential and office property – have emerged into one of the less welcomed features of Myanmar’s post-reform period. Although prices have stopped rising in the recent past as buyers and investors took a more cautious approach ahead of Myanmar’s crucial November 8 general elections, they are now stuck at still prohibitively high rates. Government measures such as allocation of land to private developers to enable the launch of more housing and office projects should ease price pressure in the mid-term, Thida said, and by 2018 a “competitive level” compared to regional peer nations should have been reached. In addition, a new housing development law focusing on low-cost residential construction should come into effect “soon” and a new mortgage scheme has already been launched to increase affordability of housing for lower income earners and bring down the extreme distortion on the market.
According to government statistics , almost two thirds of households in Myanmar earn a monthly income in US dollar terms of less than $235, while small studio apartments in new developments in downtown Yangon have monthly rent price tags of more than $2,000, with larger one- or two -bedroom flats commanding up to a whopping $7,000 per month. Buyers able to find new condos at square-metre prices below $4,500 in Yangon are considered lucky. As a result of the property bubble, fuelled by speculation, inflow of “hot money” from wealthy Myanmar expats and high construction cost because most materials need to be imported, an estimated 200,000 people have sought cheap housing in unregulated shanty settlements at Yangon’s outskirts. This, in turn, has prompted the government to promise to construct at least 30,000 low-cost units over the next three years. But scarcity of land for housing developments and other urbanisation problems, including the increasing number of migrant workers from rural areas who want to partake in Yangon’s economic upswing, pose major challenges.
Additionally, the number of land disputes has risen dramatically in the recent past, resulting in forced evictions mainly in suburban townships where industrial zones are spreading and demand for middle-class homes is rising.
But high property prices are not just a plight for residents, but naturally also remain one of the biggest barriers for businesses in Myanmar, especially for small and medium enterprises and retailers, with shop and office rents in Yangon’s central business district having reached around $70 per square metre per months without utilities, six-fold above current average office rents in downtown Singapore.
Some observers even doubt that the situation will improve in the said period up to 2018. Provided a peaceful November 8 election that brings with it an end to political uncertainty and more democratic and open market reforms, investors are likely to return to Myanmar to focus on the many opportunities still untapped in the country.
With the envisaged launch of the ASEAN Economic Community by the end of 2015, Myanmar’s standing within the ten-member association will be strengthened, apart from its role as a hub between the two giant economies of China and India, which in fact leaves little leeway for a slow-down in property prices.
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