Myanmar’s residential property market facing downward correction

The heydays for landlords in Myanmar’s with sky-high rents in larger cities are apparently over.  A global property firm says that 2018 will bring a substantial downward correction for rental yields from the days when a premium apartment in Yangon would costs the equivalent of a similar apartment in New York or Hong Kong, i.e. up to $7,000 for a two-bedroom unit at a prime location.

According to Tony Picon, director of Colliers International Myanmar, residential rents are seen to continually correct downwards, a trend that started in 2015.  This will drive capital rates to settle within the high-single-digit range compared to the 18-22 per cent recorded in the past three to four years, he said.

“Yields will however remain competitive regionally. We advise investors to be cautious with their selection process and aim for products and locations with high rental potential,” he noted, since Myanmar’s main business centers Yangon and Mandalay were coming from a low supply base and still remain in a nascent stage of property development.

The trend is further propelled by a growing demand for serviced apartments. With relatively reasonable rents along with basic but functional features, limited and lower-tier serviced apartments will gain further traction despite being smaller in scale, Picon said.

“Growth in apartments dedicated purely for lease is likely, more so with the relative absence of competition from small condominium units for rent. Additionally, limited supply in the medium term provides a window of opportunity for many developers,” he added.

Furthermore, lower-tier but modern apartments and condominiums are likely to witness better sales performance in tandem with banks getting more confident to offer more reasonable mortgage terms and partner with lower-tier developments in addition to high-end projects. In turn, buyers are likely to gain more trust towards basic but modern developments, smaller in size and priced more reasonably.

While domestic and foreign buyers in the past were mainly interested in property development in Myanmar’s commercial hub Yangon, attention is now also focusing on Mandalay, the hub of the country’s heartland and the last royal capital,

“Mandalay is Myanmar’s northern powerhouse. With mixed-use development seen to be an attractive concept in Mandalay city, other developers are likely to jump on the bandwagon. Big-ticket projects may soon be revealed,” Picon said, adding that “Colliers recommends developers to design satellite communities that offer an upgrade in terms of living quality. Products should be geared towards exclusive landed residences. This should be reinforced with a destination retail to create critical mass.”

“However, speedy reforms and further economic liberalisation will be fundamental, eventually driving the real estate sector into new heights,” he added.

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The heydays for landlords in Myanmar’s with sky-high rents in larger cities are apparently over.  A global property firm says that 2018 will bring a substantial downward correction for rental yields from the days when a premium apartment in Yangon would costs the equivalent of a similar apartment in New York or Hong Kong, i.e. up to $7,000 for a two-bedroom unit at a prime location.

The heydays for landlords in Myanmar’s with sky-high rents in larger cities are apparently over.  A global property firm says that 2018 will bring a substantial downward correction for rental yields from the days when a premium apartment in Yangon would costs the equivalent of a similar apartment in New York or Hong Kong, i.e. up to $7,000 for a two-bedroom unit at a prime location.

According to Tony Picon, director of Colliers International Myanmar, residential rents are seen to continually correct downwards, a trend that started in 2015.  This will drive capital rates to settle within the high-single-digit range compared to the 18-22 per cent recorded in the past three to four years, he said.

“Yields will however remain competitive regionally. We advise investors to be cautious with their selection process and aim for products and locations with high rental potential,” he noted, since Myanmar’s main business centers Yangon and Mandalay were coming from a low supply base and still remain in a nascent stage of property development.

The trend is further propelled by a growing demand for serviced apartments. With relatively reasonable rents along with basic but functional features, limited and lower-tier serviced apartments will gain further traction despite being smaller in scale, Picon said.

“Growth in apartments dedicated purely for lease is likely, more so with the relative absence of competition from small condominium units for rent. Additionally, limited supply in the medium term provides a window of opportunity for many developers,” he added.

Furthermore, lower-tier but modern apartments and condominiums are likely to witness better sales performance in tandem with banks getting more confident to offer more reasonable mortgage terms and partner with lower-tier developments in addition to high-end projects. In turn, buyers are likely to gain more trust towards basic but modern developments, smaller in size and priced more reasonably.

While domestic and foreign buyers in the past were mainly interested in property development in Myanmar’s commercial hub Yangon, attention is now also focusing on Mandalay, the hub of the country’s heartland and the last royal capital,

“Mandalay is Myanmar’s northern powerhouse. With mixed-use development seen to be an attractive concept in Mandalay city, other developers are likely to jump on the bandwagon. Big-ticket projects may soon be revealed,” Picon said, adding that “Colliers recommends developers to design satellite communities that offer an upgrade in terms of living quality. Products should be geared towards exclusive landed residences. This should be reinforced with a destination retail to create critical mass.”

“However, speedy reforms and further economic liberalisation will be fundamental, eventually driving the real estate sector into new heights,” he added.

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