Ever since Myanmar opened up to the world and denounced its military dictatorship, the country has 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.
The value of real estate in the former capital city of Myanmar has skyrocketed as demand outstrips supply. As the country opens up, more foreign companies are expanding to Myanmar which boosts demand for offices.
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 meeting and overtaking demand, the once bright future for Yangon’s property market is not as hopeful.
Why is the Yangon Property Market Underperforming?
While current investors in real estate are all happy with their decision to come into Myanmar a few years ago, potential investors are thinking twice before they enter the “golden land”. There are many reasons, but these 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 real estate market, which led to a halt in the property boom last year. 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 – arguably quite poor. 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 50 years
Lastly, 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. This makes them unable to give loans to property developers. Some developers need to finance their own construction with advances they receive from unit sales.
The danger from this is that, in some cases, construction was halted because they failed to meet their sales target. These developments are stalled or cancelled afterwards.
Even though Myanmar has opened up, they must still bring their real estate sector up to regional standards. Investors are better off looking at countries such as Cambodia and Vietnam to invest in property.
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