Ever since Myanmar opened up to the world and denounced its military dictatorship, the country benefited from increased trade and an exponential increase in foreign direct investment. This is true for all sectors and the Yangon property market is no exception.
Real estate values in the former capital city of Myanmar have skyrocketed as demand outstrips supply. More foreign companies are expanding into Yangon which naturally boosts demand for office space.
However, property developers did not see this coming. A shortage of quality office space has since led to a huge surge in prices. In fact, prime office space in Yangon is now among the most expensive in the world.
Attractive pricing drew in many property developers and financing for high-rise offices. Because of this, enough units were built recently that market equilibrium for quality office space is almost achieved.
With supply overtaking demand, the once bright future for Yangon’s property market isn’t as hopeful anymore.
Why is the Yangon Property Market Underperforming?
Current real estate investors are all happy with their decision to invest in Myanmar a few years ago, yet potential investors are thinking twice before they enter the “golden land”.
There are several reasons, but they can be boiled down to two – an unpredictable real estate market from the lack of political stability, and a large number of people who feel discouraged to make property purchases.
Politics played an important role in the Yangon real estate market, which led to a halt in the property boom. Everyone is watching what the government led by Nobel Peace Prize winner, Aung San Suu Kyi, will be like.
The managing director of Colliers International in Myanmar said that he’s still optimistic about the property market. He says the effect from the nation’s politics played out as predicted and did not really come as a surprise to anyone. He’s probably biased though.
Nobody is Buying Real Estate in Yangon
Myanmar’s political situation led to an unstable real estate market. But willingness to buy property has also decreased overall. This is because of two main reasons.
First, the living standards in Myanmar are still not great – quite poor, actually. This hinders the property market, especially when foreigners rank living standards as the most important thing when looking for a new country to live in.
Laws stop easy ownership of property in Myanmar, and there’s also a distinct lack of modern infrastructure. Yangon is still working on infrastructure the British left – roads, railways, power and water supply dating back more than 50 years.
Second, buyers can never be sure of their purchases. This applies especially to both ongoing and future projects. Myanmar banks are undercapitalized due to an outdated financial system.
As such, banks are unable to give loans to property developers. Some developers must finance their own construction with advances they receive from unit sales.
The danger from this is that, in some cases, construction was halted because the developer failed to meet their sales target. These projects are indefinitely stalled or cancelled afterwards.
Even though Myanmar opened up, they must still bring their real estate sector up to regional standards. Investors are currently better off looking at places like Cambodia and Vietnam to buy property.
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