Research & Forecast Report
Yangon | Condominium Market
Project launches increase despite weakening take-up rate
Developers remained confident as project launches continued to soar in 2014, hitting a new record high of 4,150 condominium units, tripling over the past two years. However, the market appears less optimistic as the overall sales performance weakened for the year. The average take-up rate declined by a substantial 12 and 15% from 2013 and 2012, respectively. Colliers predicts that the rate will further decline in 2015 as new large scale developments will be revealed along with the sales opening of new residential phases in on-going projects. At present, the total unsold inventory from all pre-selling projects is estimated at 3,310 units, up by over 2,100 units YoY.
2014 project launches hit new record high
The number of newly launched condominium developments reached a new record high in 2014. Some 37 new projects initiated pre-sales during the year, translating to some 4,150 units, a significant increase of 76% YoY, and triple the growth in 2012. Local developments continued to lead the number, while large-scale foreign-invested projects are beginning to represent a considerable share.
One of these is Dagon City 1, which initially launched the first phase of its mixed-use project in 3Q 2014. Occupying a 22-acre Build-Operate-Transfer (BOT) piece of land, the integrated development will consist of mid-rise residential and commercial buildings, estimated to be completed within the span of three years. Of the first condominium block, some 300 units were reportedly reserved. An additional 288 units are slated to be launched in the next three months following the announcement of the second phase, while the sales of the remaining two phases will be opened successively.
Launched earlier in 2014, Golden City likewise consists of a considerable amount of stock represented by nine 33-storey residential towers. The first phase includes four buildings, each with 126 units. The sales reservations for the remaining towers is expected to commence after with some 940 units.
The foreign interest in joint venture deals continues to heighten with new big-ticket integrated projects expected to be revealed in the near future. This suggests an increasing stock of international quality condominiums going forward. Colliers predicts that local developers will start reviewing business plans, and redesign project schemes and technical specifications, in order to compete with the increasing competition. In fact, others have moved ahead by engaging international property specialists (real estate consultants, architects and engineers) to gain leverage.
Limited) in Tamwe Township; Sanchaung Garden Residence (Sanchaung Garden Development Group) in Sanchaung Township; and Royal Sayarsan Condominium (Than Htike Lu Gems, Mineral & Construction Co. Ltd and Linn Yi Construction Co. Ltd) in Bahan Township, all of which are located in the Inner City zone. By location, the Inner City zone registered the highest number of new launches in 2014, and is now nearly at par with the Outer City in terms of the total units launched since 2009. The latter is being largely represented by the large-scale project, Thanlyin Star City. Owing to the centrality of the location, coupled with the availability of attractive developable plots of land, future launches in the Inner City are expected to trend upwards. However, largescale mixed-use development is seen to surface in the Outer City zone where larger land plots are available.
Over 2,400 units to be completed annually
Due to the rise in project launches, Yangon’s high-rise residential landscape is expected to take shape rapidly in the next three years. In fact, as of the end of 2014, the total completed stock of notable condominiums rose by 72% YoY to 2,681 units. The number will almost double in 2015 with some 5,081 units slated for completion.
The city will witness an average of 2,400 new units completed annually from 2015 to 2018, a remarkable increase in new supply versus that from 2011 to 2014, when the yearly average was 530 units. This development has begun to become evident, especially with the recent completion of Thanlyin Star City’s Zone A in 2014. From 2016 to 2017, the other large-scale projects, namely Golden City (Golden Land); Dagon City 1 (Marga Landmark); Capital City (Capital Development Ltd); and Time City (Crown Advanced Construction), will begin to surface.
Dwindling take-up rates most likely to continue
Despite the developers’ bullish market sentiments, the sales performance of pre-selling condominiums dampened significantly as of the end of 2014. The average citywide take-up rate registered a dismal 68%, compared to 2013’s 80% and 2012’s 83%. The substantial rise in project launches coupled with the weakening sales velocity of inferior quality developments caused the drag in the overall sales take-up. Moreover, the relatively high selling price, owing to large unit sizes, continues to deter purchases from the untapped majority of owner-occupiers, and from investors seeking rental potential amid the growing number of single expatriates in Yangon.
However, on a quarterly basis, the average take-up rate was up by 6%, mainly fuelled by the strong sales performance in newly launched projects in the Downtown area. The take-up rate in the area similarly grew by a substantial 20% YoY amid limited sales launches. Nonetheless, this was inadequate to help buoy the citywide rate for the year, as sales in other locations remained challenged. In particular, the rate in the Outer City zone dropped significantly by 18% YoY caused by sluggish sales of low-quality developments, mostly on the fringes of Thuwanna, Tamwe and Thingangyun Townships. Though the take-up in the Inner City zone dropped by 7% YoY, key selected developments have recorded sturdy performance with over 15% monthly sales velocity.
At present, the total unsold inventory from all pre-selling projects is estimated at 3,310 units, up by over 2,100 units YoY. With the announcement of new large-scale projects in 2015, coupled with the launch of new phases in on-going projects, Colliers predicts that the sales take-up rate will further decline, at least in the near term. Moreover, the election uncertainty will temporarily mute project launches in the latter part of the year as investors and developers take a “wait-and-see” approach. This may potentially narrow the gap between take-up and sales moving forward.
As of the end of 2014, there were roughly 54 pre-selling projects in Yangon. Of these, 65% are categorised as upper mid-market segment. The number of high-end and luxury projects represent 26% of the total, and the rest were classified as mid-market. The average selling price for the luxury segment was USD5,077 psm. This translates to about USD610,000 for a typical twobedroom unit. The average price for high-end developments was USD3,842 psm. The majority of the pre-selling upper-mid market projects were selling at between USD2,300 and 3,900 psm, while, the mid-market average price was USD1,895 psm.
The expensive land prices and high cost of construction are putting upward pressure on selling prices. However, the growing competition, particularly in the upper-mid to highend segments, on the back of the lowering levels of take-up rate suggest that the average sales price will be stable in the near term, but is in for a correction once launches continue to exceed demand going forward.
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Source: Colliers International Myanmar