Myanmar remains one of the most unpredictable real estate markets in Asia. And given its status as a frontier market, this is to be expected to a certain extent. The one person who has seen the country’s ups and downs during the decade is Antony Picon, Currently serving as vice-chairman at Colliers International in Myanmar, he has been living and working in the country since 2012. He was kind enough to share his expert insights on Myanmar’s real estate market.
Overall, how would you describe the performance of Myanmar’s real estate sector this year? Are there any sectors performing better than others? What have been some of the positives?
It has been a mixed picture for real estate so far in 2017. On the downside, the condominium market remains in the doldrums while office demand is somewhat cool awaiting further economic liberalisation measures which would boost the sector. The upscale hotel sector in Yangon is in a very challenging period due to a rapid increase in supply and muted demand in terms of tourist visits to Yangon. On the bright side retail is very robust, the serviced apartment market remains strong largely due to the inherent weaknesses in the condominium sector. Of more importance to the economy is the rise of the industrial sector which is very promising.
What, if any, impact has the ongoing conflict in Myanmar had on the real estate market? Are international real estate investors reconsidering the country?
I would say the effect is limited at the moment as most investors are already here or are committed to Myanmar and they are less risk averse compared to those still standing on the sidelines. For the past five years, since the opening up of the country, there have been some dark clouds hovering over such as the by-elections, elections and formation of the new government and various conflicts. If businesses did not invest in Myanmar due to these factors, then we would have no progress and development of the country for a long time.
The condominium market in Myanmar has been cited for its sluggish performance. Do you see any signs of a recovery on the horizon? Are there any segments of the condominium market that stand out?
An eventual implementation of the condo law will help spur a renewed interest in Myanmar’s real estate sector with some added demand from foreigners. However, the long term prospects are gloomy given the parking requirements of 1.2 spaces per unit which makes it very difficult to reduce the unit sizes and cater for growing untapped demand for more affordable units. There is a growing oversupply of large, three-bedroom units and undersupply of smaller one-bedroom units and this will remain while the parking requirements are in force. Overall in a difficult market the mid-end category remains more robust.
There has been a lot of confusion in regards to foreign ownership of property with regulation of the 2016 Condominium Law still yet to be enacted. Can you provide an update on the foreign ownership rules? If these do take effect, what will their impact be?
For the past five years, a condominium law has been in the process and we are still at a stage where there is no notification of the 2016 law and as such we can only consider statements for various government officials. At present the law may allow 25 percent foreign ownership of the number of units which is lower than the previously slated 40 percent. However, it will still help spur demand particularly from Asian buyers. There are a number of provisions that provide security to buyers of off-plan projects and having a legal definition of a condominium would help.
Moving away from the residential sector, there has been some buzz around the retail sector with a few notable malls and mixed-use developments having opened and others in the pipeline. Can the market support all of these shopping centres? Will we see developers launching more retail projects in the future?
Just like the rest of Southeast Asia, locals and expats take to the shopping centre experience like a fish takes to water. The hot and rainy weather for most of the year means air-conditioned shopping centres offer one of the few ways they can spend their free time. Due to the limited fluidity of traffic in Yangon on account of poor public transport and a ban on motorbikes the city is crying out for large destination malls where visitors can spend half a day or more thus justifying the difficult and long trip to and from the mall. Food and beverage and entertainment are key components due to the current spending power of most Yangon residents.
What is one thing people may not know about Myanmar’s real estate market?
Cash is king when it comes to residential buying. During the sales boom in the condominium sector a few years ago, some sales offices sounded like factories with all the money counting machines in use. Hopefully over time the reliance of cash will reduce.
Looking ahead to 2017 and beyond, what do you think the future holds for Myanmar’s real estate sector?
Overall we are optimistic but it will remain a mixed picture when analysing each sector. In frontier markets, generally the market moves forwards but not in a regular way. Demand and supply imbalances, government policies both positive and negative have far more significant impacts on real estate than they do in more developed countries. This is why up to date and incisive research and analysis of each sector is critical and highly sort-after to give investors and other players the edge in the market.