In urban spaces in Myanmar, the maze of new constructions seems to indicate that real estate business is booming and a lot of people, both local and foreigners are picking up units in every new project. Comparing Yangon with what it was five years ago, is testimony enough for this conception. The city’s skyline has changed, with both commercial and residential high rise buildings, hotels and service apartments mushrooming in all parts of the city. Obviously, millions of dollars of domestic and foreign investors have been spent on transforming Myanmar’s cities, Yangon, ubiquitously in the lead. While there has been a slowdown, a price correction after a phase of inflated demand, the real estate sector is poised for growth, even more so beyond its commercial center. Property investment has always been perceived to bring steady returns in the long run, and often multifold returns in the short run, for the astute investors. The real estate sector is one that can create as well as multiply wealth, provided, investments have been cautiously made. Research reveals that globally, returns from property help to beat inflation levels, remaining positive in the long run despite short term fluctuations. Property forms a significant proportion of the high net worth individuals’ portfolio, a secure base for the middle class, and perhaps a distant dream for the economically weaker sections
Myanmar citizens prefer property over other assets
In Myanmar, the real estate sector has been receiving the highest amount of investment, both domestic and foreign, with sectors like manufacturing etc trailing behind. The sector accounted for more than 20% of the total domestic investment, and latest figures place the amount at 2.9 trillion Kyats, in 2017-18. The reasons for this are not far to seek. Till five years ago, public faith and trust in banks was minimal, and cash was preferred over bank deposits. Cash was used for asset purchases in the form of precious metals like gold and silver, precious stones, and cars. Lack of availability of other avenues for investment, namely stocks, shares, and government bonds, made the property market the most suitable place to invest. The upper strata opted for investment in land and houses, till apartments and condominiums came up. Once these high rise structures appeared, it was the same small group of people buying multiple units in upcoming complexes, like Crystal Residences, Gems Condominium, Shwe Hintha Luxury Condominium, Pyay Garden, Golden City and etc. These were then put up for rent and the target was expatriates, looking for safe residences that were somewhat comparable to international standards.
The property laws also favor local investment alone. Only Myanmar citizens can buy land, landed properties, c o m m e r c i a l , r e t a i l s p a c e s a n d apartments, and can sell also only to local buyers. Foreigners are, after the new condominium law of 2016, allowed to purchase 40% of the floor area, but 6th floor upwards. Ever sine the Law was passed, there has been increased local interest in property purchase since a number of loopholes have been plugged, and buyer interests have been secured. Restrictions on builders have ensured that there is transparency and a universal set of rules apply to all, presales options and price manipulations being restricted.
In Yangon, the downtown area being congested, some of the top developments have come up on Pyay Road, Parami, Road, Kabar Aye Pagoda Road, Bahan township and around Kandawgyi Lake. Lower cost housing projects are coming up on the periphery of the city and in suburbs.
Maximizing returns from property investment
Property and real estate are definitely alternate stores of value that yield returns, are safe and tangible, and serve as a secure resource in troubled times. The property market like any other, passes through cyclical changes in prices, based largely on demand and supply for the same. However, it is never as volatile as the stock market. It is a given that land will always be scarce, but the trend of constructing high rise complexes helps to keep up supply to meet demand. Prices fluctuate due to the demand-supply mismatch, and one can make a substantial profit by buying at lower levels and selling at peak demand times. The ideal time to buy is when the price curve has touched the bottom and is on an upward swing. Selling at times when demand is high, and buying when supply is high, and timing the market, make perfect economic sense.
Investors need to be on the lookout for new upcoming properties in newer areas that are still developing. This makes them cheaper with room to appreciate, in value. Keeping in mind the quality of construction, the infrastructure in the area, and a long term perspective, that is, a buy-and-hold policy, will yield high returns.
The first property investment is in a residence for self occupancy, and subsequent additions can be rented out, to yield a steady rental income. While this seems easy for the upper class, the middle class and lower classes, have to plan, save, cut current expenses and take loans, to buy even a place to stay. This however, is a way to cut present expenses, to build an investment portfolio and secure the future. Commercial property investment is the prerogative of those with surplus cash, and few from the middle class opt for these investments even though these often promise higher returns.
Unique features of Myanmar’s Property Market
Myanmar’s real estate sector is unique in many ways. As one of the last frontiers of growth in Asia, Myanmar is seeing rapid urbanization, an unprecedented wave of consumerism, a surge in its business activities even as industrial development begins, and a new-found preference for good quality, in a market full of poorer quality constructions. This has led to an exponential increase in opportunities to invest in real estate, for residential, commercial, retail and hotel properties, thus making it the sector getting the highest investment.
The interest in real estate skyrocketed in 2011-12 and this caused prices to shoot up to unreasonable, unsustainable levels, and the phase of demand outstripping supply, led to a massive surge in construction, with scores of projects small and big, being floated. Four years later, there have been price and demand corrections, rates have plummeted by 25-30%, and the increased supply has led to the stalling of numerous projects. Lack of adequate infrastructure, a preference for better quality, have stalled sales, and smaller projects have been canned. Unsold apartments are a problem for builders and developers, and inability to rent out their newly purchased properties are major concerns. Complexes not complying with the clearer rules of urban planning have had to suspend construction.
The land in Myanmar is the property of the government and can be leased from the latter, but there are pockets of freehold land which is the best buying option. The maximum number of property transactions take place in urban areas of Yangon, Mandalay and Naypyidaw. Property investments in most countries are funded by loans and developers work closely with banks and other financial institutions to facilitate property purchases by the middle class, that is unable to make large payments unless these can be segmented and stretched over a period of time. Mortgages are a very new concept in Myanmar, and access to housing loans has started very recently in the country, with private banks tying up with big real estate developers.
The need of the hour is low cost housing projects, which will be affording for the lower, and the new, growing middle class, that would like to see quality construction, easier loan clearances, security of investment, and improved infrastructure in those areas.