Property prices in Yangon, Mandalay in 25%-slump

Reading Time: 2 minutes
One of the many new developments: Golden Link Condominiums in Bahan Township, Yangon.
One of the many new developments: Golden Link Condominiums in Bahan Township, Yangon.

Shortly after the presidential elections, Myanmar’s property market is clearly cooling off, with prices in the two major cities of Yangon and Mandalay being in a downwards spiral after a three-year period of highly inflated levels.

Real estate prices in Yangon have fallen as much as 25 per cent in recent months, a sign that a larger market correction is underway. Many of the new apartment buildings in Myanmar’s commercial capital are struggling with high vacancy rates, and stressed developers are selling below market price as they need cash for ongoing projects.

This is especially the case in Yangon’s suburbs where developers in need for working capital are forced to cut prices significantly to keep their other constructions going.

Prime real estate in downtown Yangon is still better of, though. Here, prices dropped five to ten per cent so far, according to real estate agents who say that many people in Myanmar are uncertain about the country’s future during the current political transition, and therefore buyers and sellers have tended to take a wait-and-see attitude.

Apart from that, prospective property buyers have got an alternative opportunity to invest their money since the Yangon Stock Exchange opened this March. Falling land prices due to shifting government policies will affect apartment prices in Yangon further, market observes say.

Developers of residential projects in Yangon have also found themselves with less cash than expected because some buyers fail to stick to the terms of hire-purchase plans and do not make regular payments. An underdeveloped banking system means real estate developers tend to fund their projects through off-plan sales. Myanmar has no mortgage system and as some buyers cannot pay the entire value of an apartment upfront, many companies offer hire-purchase schemes that allow payment in instalments. Yet a number of developers have struggled to convince buyers to pay up, and have instead had to strike alternative deals that suit both sides to avoid defaults.

In Mandalay, which saw real estate prices fall by around 25 per cent as well, additional factors special to the region put pressure on the market, namely a downturn in the gems trade and a crackdown on drug trafficking which is partly drying up cash flow into new property projects. There are also less foreigners and foreign firms in Mandalay than in Yangon that would push demand for condominiums and offices.

A condominium law passed in late January that allows foreigners to buy up to 40 per cent of a building’s units will thus have little effect in Mandalay, at least for the time being, while Yangon could benefit as foreign direct investment (FDI) keeps flowing into the country.

FDI inflows reached a record high in the 2015-16 fiscal year at $9.48 billion, according to the Directorate of Investment and Company Administration, after $8 billion in 2014-15 and $4.1 billion in 2013-14. This is despite foreign investors’ reservations ahead of the general election last November.

The country has now set its sights on attracting no less than $140 billion in FDI from now until 2030, according to a national economic development plan.

Do you like this post?
  • Fascinated
  • Happy
  • Sad
  • Angry
  • Bored
  • Afraid

Reading Time: 2 minutes

One of the many new developments: Golden Link Condominiums in Bahan Township, Yangon.

Shortly after the presidential elections, Myanmar’s property market is clearly cooling off, with prices in the two major cities of Yangon and Mandalay being in a downwards spiral after a three-year period of highly inflated levels.

Reading Time: 2 minutes

One of the many new developments: Golden Link Condominiums in Bahan Township, Yangon.
One of the many new developments: Golden Link Condominiums in Bahan Township, Yangon.

Shortly after the presidential elections, Myanmar’s property market is clearly cooling off, with prices in the two major cities of Yangon and Mandalay being in a downwards spiral after a three-year period of highly inflated levels.

Real estate prices in Yangon have fallen as much as 25 per cent in recent months, a sign that a larger market correction is underway. Many of the new apartment buildings in Myanmar’s commercial capital are struggling with high vacancy rates, and stressed developers are selling below market price as they need cash for ongoing projects.

This is especially the case in Yangon’s suburbs where developers in need for working capital are forced to cut prices significantly to keep their other constructions going.

Prime real estate in downtown Yangon is still better of, though. Here, prices dropped five to ten per cent so far, according to real estate agents who say that many people in Myanmar are uncertain about the country’s future during the current political transition, and therefore buyers and sellers have tended to take a wait-and-see attitude.

Apart from that, prospective property buyers have got an alternative opportunity to invest their money since the Yangon Stock Exchange opened this March. Falling land prices due to shifting government policies will affect apartment prices in Yangon further, market observes say.

Developers of residential projects in Yangon have also found themselves with less cash than expected because some buyers fail to stick to the terms of hire-purchase plans and do not make regular payments. An underdeveloped banking system means real estate developers tend to fund their projects through off-plan sales. Myanmar has no mortgage system and as some buyers cannot pay the entire value of an apartment upfront, many companies offer hire-purchase schemes that allow payment in instalments. Yet a number of developers have struggled to convince buyers to pay up, and have instead had to strike alternative deals that suit both sides to avoid defaults.

In Mandalay, which saw real estate prices fall by around 25 per cent as well, additional factors special to the region put pressure on the market, namely a downturn in the gems trade and a crackdown on drug trafficking which is partly drying up cash flow into new property projects. There are also less foreigners and foreign firms in Mandalay than in Yangon that would push demand for condominiums and offices.

A condominium law passed in late January that allows foreigners to buy up to 40 per cent of a building’s units will thus have little effect in Mandalay, at least for the time being, while Yangon could benefit as foreign direct investment (FDI) keeps flowing into the country.

FDI inflows reached a record high in the 2015-16 fiscal year at $9.48 billion, according to the Directorate of Investment and Company Administration, after $8 billion in 2014-15 and $4.1 billion in 2013-14. This is despite foreign investors’ reservations ahead of the general election last November.

The country has now set its sights on attracting no less than $140 billion in FDI from now until 2030, according to a national economic development plan.

Do you like this post?
  • Fascinated
  • Happy
  • Sad
  • Angry
  • Bored
  • Afraid