Overview
Real estate developments in Myanmar can be categorized into three main categories; residential, office space and commercial. In 2015, the average price was $368 per square feet and the average size for a unit is over 2,500 sq ft. Real estate Developers prefer building very large, family-sized units, with three or more bedrooms. By combining these and the price per sq ft is applied on the large scale and many units end up costing as much as half a million US dollars. Many real estate projects experienced significant vacancy levels with several projects completed in 2015 with occupancy rates of 10% or below. In 2015, mid-town office locations got more demand and it was a shift from downtown office spaces due to the increasing traffic congestion in Yangon’s overcrowded downtown. The entrance of new office spaces offering more flexibility and options, forcing landlords to lower the rate and make the rates and provided facilities more competitive. It can be observed that real estate projects must combine the right balance of quality, location and affordability to be successful. It can be observed that real estate projects must combine the right balance of quality, location and affordability.
Opportunities and Barriers
The real estate market in Myanmar still presents considerable opportunities despite its oversupply. However, to make profits, professional market research, due diligence and advice are increasingly important. Recently, the number of new projects being launched has skyrocketed, yet the market underwent a noticeable slowdown. This was partly due to an oversupply of properties and the real estate laws continue to restrict most real estate purchases to Myanmar citizens. It can be observed that real estate projects must combine the right balance of quality, location and affordability to be successful. The influx of these FDIs is unlikely to cause office rents to rise to their previous inflated levels, but will slow the current drop in rents and likely to reach a plateauing of rents over the next year. Land title, entitlement and transfer is the major issue related to real estate projects. Buyers and developers are facing uncertainties regarding land title and transfer. There is currently no real clear legal differentiation between land and building title, so it has frequently been unclear what product the buyer is purchasing. Most of the FDI projects have successfully marketed properties on a 70-year BOT long lease basics with extendable periods after that. This sort of approach gives investors piece of mind and the ability to plan their portfolios over a defined period. Despite this fact, however, investor and buyer confidence has recently been severely shaken by the cancellation of 5 projects close to the Shwedagon Pagoda in central Yangon. The devaluation of the Myanmar Kyat in relation to the US Dollar is causing many buyers to hesitate. Myanmar citizens interested to buy cannot afford anymore and it is also troublesome for developers using schemes with staggered payment plans.
Legal & Regulatory Framework
In 2016, the Condominium Law has been passed by parliament but until it is signed by the president, it is difficult to predict what impact it will have on the market. Until now only Myanmar citizens have been able to buy property. The Condominium Law will allow foreigners to buy up to 40% of units in condominium towers. It is not yet clear which projects will match the law’s definition of a condominium.
Allowed Types of Investment
Investment businesses allowed only in the form of joint venture with a citizen owned entity or a Myanmar citizen are establishing and sale of residential building and condominium and renting thereof.
Sources
- YANGON REAL ESTATE MARKET 2015 REVIEW, Slade Property Services, February 2016
- Investing in the Myanmar Real Estate Sector, VDB Loi, 2014
