Land, houses, apartments, hotel rooms, offices, and everything related to real estate is hitting the roof in terms of both sale prices and rents. This is Yangon’s disturbing reali- ty, frustrating for those coming to work and live here, and even for those contemplating investing here, who back off once price lev- els are indicated. The accelerating pace of reforms is not complemented by infrastruc- ture development and the property crunch is one of the outcomes of this.
Real estate prices in Yangon beat Manhat- tan rates for similar properties, and remain the highest in South East Asia. For a country
that opened its doors to the world around two and a half years ago, there is insufficient supply to meet the spiraling demand, with expatriates coming in hundreds from vir- tually every country. Businesses are eyeing the growth potential and a ready customer base that Myanmar offers, and therefore, are sending middle to senior level execu- tives, who now prefer moving in with their families. With companies like Oredoo and Telenor bringing in hundreds of executives, the demand has scaled multiple levels above supply. There is an expectation of finding a residence that is closer to international standards, though only very few would qualify. The result is very high rents that seem unjustified, given the quality on offer. Home seekers are desperate to grab the few mod- ern apartments and houses available.
The construction industry started growing only in 2005, but could not keep pace with the demand which has grown at an accel- erated pace in the last 3 years. Land prices are sky high, making construction on pri- vate property extremely expensive. For a country seeing the biggest spurt in tourist numbers, accommodation has to be made available. International hotel chains are coming in, and existing hotels are adding rooms. Still, for the present, prices remain unjustifiably high.
Office space faces the same constraints, since only a handful of office towers offer the facilities sought by multinationals, and banks. Sakura Towers, UBC, and Center Point are the most popular, and scores of houses and apartments have been convert- ed into offices. In fact, this makes the supply of residences even lesser, pushing up rentals further. Pearl Condo, a large multi-storeyed complex, offering hundreds of apartment in 5 tall buildings, besides a shopping area and recreational facilities, not to mention its central location, has tens of offices oc- cupying numerous apartments. It was once highly affordable with a three-bedroom apartment, often converted into an office, available for USD 1200, but now owners charge over USD 3000. New offices are coming up and likely to be available 2015 onwards, including the Yangon Business Center, the Strand Office Complex, Novotel Office and Retail Space, and Dagon City-1.
A drive around Yangon shows a select few plush, modern structures, sprawling man-
sions and compact houses, and hundreds of apartment buildings in downtown Yangon, almost all looking dilapidated and unclean. A recent survey revealed that 2000 of these buildings have been illegally constructed. Condominiums like Shwe Hintha Luxury Condominium and Mindamar, offer su- perior apartments furnished varyingly by apartment owners. Serviced apartments like Micasa, Marina, Sakura, Golden Hill and Shangri-la, offer smaller apartments, with little space to accommodate personal collections. New houses are seen in Golden Valley, and other areas, and old ones being renovated, only to be offered at atrociously high rents. Pun Hliang Golf Estate and Star City, across the river, provide a taste of sub- urban living, with all facilities but remain so far from the city center that most newcom- ers avoid going that far. A two-hour daily commute is quite avoidable.
The property owners perspective
It does not take long for an expatriate to figure out that property ownership is a pre- rogative of the local elite. The current prop- erty ownership laws permit only Myanmar citizens to own landed property and rich Myanmar locals have multiple properties. Perhaps during the military regime, it was the ideal store of value, even though, at that time, it did not reap returns. Rents at that time were abysmally low with demand for rented accommodation coming mainly from diplomats and UN personnel. Post -2011, rents shot up as demand from foreigners increased, and owners saw this as the best opportunity to make up for lost time and capitalize on their assets. The rents they de- mand and quote are often on a whim, and they would rather leave the place vacant than agree to a lower rent. Little wonder
then, that similar properties vary up to USD 2000 in rental value. All of them expect a full 12 months’ rent in cash in advance, and once the money is in their hands, they disap- pear for the whole year, unconcerned about maintenance issues or their tenants. Owners of better, well located properties are wooed by prospective tenants. Flaunt- ing their offers, they make other interested tenants feel small. Very few seem inclined to spend on providing all that the tenant wants, and would ideally like them to occupy the residence as it is. Any additions are big favors, and the frequently observed callous indifference is often unnerving.
Perhaps they find expatriates fussy, and cannot fathom their high expectations. Me- diocre facilities are good enough, they feel, especially when compared to the general standard prevalent here.
Value for money as the client sees it, is of no concern to them. They feel they can demand any amount since they are providing extra fa- cilities, not easily found elsewhere in the city.
The tenants’ story
It is not that one does not come across hap- py tenants. This is partly due to the fear of being asked to vacate or see rents increased, that tenants do not ask for more comforts. In the last two years, things have improved. On the flip side, not keeping promises made at the time of signing the lease is the most common complaint against landlords. Ever so often, a landlord promises ‘the best in Yangon’, for a higher rent, but delivers sub-standard furniture and fittings, with the lame excuse that Myanmar has no better. My own experience made me realize that I paid $500 extra per month for an apartment customized to my tastes, but what I got was poor quality accessories. For those accus- tomed to living with finer things, this is an exasperating letdown. For the expatriate, common courtesies like answering messag- es and returning calls, are important, but the typical landlord, will choose to not re- ceive your call, leave alone return it, ignore messages, and be unconcerned, till it is time to claim the next year’s rent. However, if a tenant is fortunate, he may come across a landowner who will provide good quality ac- cessories. Often, these are Myanmar locals who have spent time overseas, and have a taste of international living standards. Some may have furnished their home with fine teak and top class fittings and put up the place for rent, sensing its earning potential. Lucky are those who represent multination- al companies willing to foot the bill for any apartment that appeals to them. For those, whose companies provide less than the top rental slabs, it can be frustrating, since they have been accustomed to better living stan- dards elsewhere. Instead of downgrading their living standards, one hears of expats considering a shift of residence to Bang- kok and commuting every week-this is far cheaper than finding accommodation of equivalent standards in Yangon.
Current demand supply situation
Property supply is unlikely to meet the pro- jected demand levels for the next five years. This explains the 60% increase in rents be- tween 2013 and 2014. Colliers Internation- al, the leading real estate research compa- ny, predicts a further 25% increase of office rents in Yangon in the next twenty four months.
Numerous residential projects by local and foreign developers are coming up, and work on construction sites is progressing at a fan- tastic pace. In the next two years, one can expect to see the completion of high end project like 68-Residences, the Vietnamese HAGL on Kabar Aye Pagoda Road, GEMS on Insein Road, Crystal Residences on Pyay Road, and numerous other small projects in Golden Valley and other prime localities.
The earliest availability of multiple residen- tial apartments is likely to be late 2015, till which time rents will keep climbing, espe- cially of better accommodation.
The real estate agents role
Property brokers are known to influence the rising rent trend in the city to a great extent. Their innate ability to turn rumor into reality, in the absence of transparency in deals and insufficient information avail- able online, helps push rents further up. In an interaction with over a dozen agents, one will find different rates quoted for the same property, and their insistence that nothing is available, creating a panic in the prospect ive tenants mind, which will push him to pay more. So many of us have been victims of this.
Myanmar is one of the very few, if not the only place where agents charge a full month’s rent both from the owner and the tenant. This pushes up the monthly rentals by at least 8%, and the landowner passes on his fee to the tenant by pushing rent that much higher.
Is there something like finding val- ue-for-money rental accommodation for an expatriate?
What meets the eye as you walk into a lux- ury condominium with its plush exterior, is a semblance of modern construction, but the missing fine finish. The corners are clumsily joined and gaps show accumulat- ed dirt. Inside the apartment, leakages and blocked pipes are a regular nuisance. The glass façade is impressive but the threat of rain water flooding apartments is what tenants are unprepared for. While wooden floors are still better, they might just have been patchily polished to cover up marks, and tiled floors might just as well have been cleaned with acid. All this, is conspicuous even in luxury condominiums like Shwe Hintha, and many a landlord, show it all off, with pride. Since it is so much a sellers mar- ket, they couldn’t care less, and it is a ‘take it, or leave it’ situation. The ‘customer is king’ concept, will take years to come here.
The initial shock is of the rents quoted and what one is getting for the money being demanded. The cost benefit analysis shows a drastic mismatch, and for now, there is nothing like getting value for money. Like choosing a lesser evil, we accept slightly bet- ter construction, a comparatively modern apartment or house, and learn gradually to accept what is available, do without what is not provided, or buy it ourselves, and pay extra for every additional comfort.
There is a high level of dependence on the property agent, often recommended by lo- cal contacts. Vulnerable due to a desperate need, and gullible due to lack of access to in- formation and language barriers, the expat relies completely on agents, convinced that his interests are being protected. Unfortu- nately, most times, it’s the owner and agent who are benefitting.
So how does one find good property? It has to be through an agent of course, but trying to find information and crosschecking rates, negotiating with owner directly, and express willingness to buy some furniture, may help in getting a more acceptable rate. Many agents have websites, but not quite useful. It is difficult to find agents who understand customer needs fully. There appears a vast disconnect between tenant requirements and options offered. Some property agents include Myanmar Deals Leasing, Shwe Property, Sky Bridge Real Estate, Pronto Services, Angel Real Estate, among others. Yangon is likely to continue as a sellers’ market for at least another 18 months, after which hopefully, as supply catches up, the bubble will burst and prices will come down to realistic, affordable levels, and perhaps even prove to be value for money.