The beginning of 2015 saw the start of the decline of the real estate market in the largest city and former capital of Myanmar. However, the previous week brought about unprecedented weak performance in the property market with absolutely no deals being made.
Representatives of several leading Yangon property agencies all agreed that the leading cause of the halted deals was the upcoming presidential elections in Myanmar, but most have also acknowledged a few other factors that they believed to be harmful to the market.
The bad effects were seen across the entire property market, no matter the size or the type of real estate. Even though the majority of investors have already ceased their activities, a few people were still in the process of selling their properties for some quick money.
The upcoming November 8 elections kept all the traders at bay because the outcome of the elections itself could change the market’s fundamentals. Most investors are patiently waiting this out, and are not willing to restart their activities until clear announcements on trading policies are made by the new government.
Yet there are other governing factors that have led to this outcome, acknowledged the vice chair of the Myanmar Real Estate Services Association (MRESA). He added that the seasonal effect from the rainy season and rising real estate taxes have also exacerbated the situation.
Both supply and demand have run low for real estate in Yangon over the past few months. A lot of property investor are hesitant to part with their assets due to Myanmar’s high tax rate compared to the rest of ASEAN.
Further worsening the situation is the current investment policy. The country only allows local investors to own property, whereas foreigners are forbidden by law to owning land or real estate of any kind – even condominiums unlike its better developed neighbor Thailand, and even less developed countries in the region such as Cambodia.
Old-fashioned laws enforcing exclusivity for property ownership to locals is one of the reasons why the property market in Myanmar has lagged behind its neighbors for a successful economy requires foreign investors as well.
New Condo Law Could Revive Yangon Property Market
However, there is a light at the end of the tunnel. A condominium law allowing foreigners to own condominium units is expected to be passed next year when the new government is elected.
Experts in the field agree that if the new government does not bring about any real policy changes to the real estate scene, the market may simply stop growing in the future. However, it does not seem like it will be happening anytime soon as there will still be property investors looking for a quick profit.
Traditionally, real estate has given the highest ROI among other sectors such as industries or garments.
Rising land prices are closely connected to the performance of local businesses as a whole, especially the SMEs. In this aspect, the setting up of companies will lead to more activity in the property sector. Therefore, the government can indirectly help the property sector by supporting sectors other than real estate.
However, help for some may already be too late. Harsh times for agencies and investors have seen some close shop, while others are now dependent on their other businesses to survive.
A common trend in property markets of every country is that they are cyclical. The silent property market is not here to stay for long, with many experts expecting it to pick up once again when the elections are done.
Nothing is certain what will become of the property sector in Yangon. but one thing is for sure: the market is now in the doldrums and those who are making a loss will be stepping out of the game until clarity on real estate policies is achieved by the new government next year.