After shooting up in 2013 and 2014, excessive speculation and political uncertainties combined are pushing down exorbitant rents
Rental rates for luxury apartments in some parts of Yangon have been steadily declining since September 2014, while rates for basic apartments have remained stable, according to real estate market forecasts.
“The rental charges in the real estate market are more stable. These days people seldom buy and some rent new offices. Although business hasn’t flourished in Yangon, prices are not declining. However, the prices in satellite towns are declining. There are plots in satellite towns and those who want cash sell them. Previously, an apartment on the third floor required Ks90 million. Now it is available for Ks85 million. The price has been gone down five to 10 per cent,” said Zaw Zaw, a real estate businessman.
“Frankly speaking, the present real estate market is not as good as before,” added Zaw Zaw.
A teacher said apartment rents depended on the location. In some townships like Tamwe and Hledan, an apartment can cost more than Ks200,000 a month while those near Thingungyun Sanpya market may cost only Ks120,000.
Since Myanmar embraced economic and political reforms, a large number of potential investors and tourists have flocked into the country amid a tight supply of accommodation. In some places, apartment rents have gone up by four times, along with real estate prices which rose at the fastest pace compared to other parts of the region.
A Myanmar migrant even said that he had spent Ks150,000 a month for a house with a compound in Mae Sot, Thailand. However, with the same amount, he could find only a small apartment.
That is true, especially in Yangon where living expenses have skyrocketed. Aside from investors and tourists, Yangon also attracts a large number of migrants from other regions of the country, as well as some nationals returning from other countries.
However, the situation has changed.
A local economist said that many investors, entering the country when the economic doors were first opened in 2011, were shocked to learn about land prices. Some are still pressing on with investment plans, but with complaints.
“We have seen this kind of prices throughout 2013 and 2014. Now, it’s 2015. The political situation is uncertain. Nobody can tell what will happen beyond 2015, and fewer investors can now be found in the real estate sector,” said the economist.
Speculation ran high particularly in 2013 and 2014.
Although a number of affordable and low-cost housing projects were implemented, they were sufficient for people. Worse, the project was priced exorbitantly, sometimes at Ks20 million. There were widespread reports that some black money went into the market, as part of money laundering or real-estate speculation. This makes it impossible for lower middle-income earners to own accommodation.
More low-cost housing projects are planned, as the government tries to rein in speculation and bring down property prices.
There were 19 affordable and low-cost housing projects being undertaken in 2014-15 nationwide by the Ministry of Construction, creating more than 18,000 new apartments.
Of these 19 projects, 15 are in Yangon Region, one in Mandalay, two in Sagaing and one in Magway.
Likewise, Department of Human Settlement and Housing Development under the Ministry of Construction has planned to build nearly 20,000 low-cost and affordable apartments in Yangon, Pathein and Mawlamyaing in 2015-16 fiscal year.
This fiscal year, 10 low-cost and affordable housing projects will be built, including 18,360 apartments in 284 buildings.
Two of the 10 housing projects will be in Dagon Seikkan Township in Yangon Region, two in South Dagon, Thingangyun, and Mingalardon in Yangon Region, and others in Thanlyin, Hlaingthaya in Yangon Region, Pathein in Ayeyawady Region and Mawlamyaing in Mon State.
Myanmar’s rising land prices in previous years have been connected to rumours about the implementation of new town projects, which has brought speculators into the real estate market.
The Dala Bridge project and the Yangon new town project shook the real estate market. However, as some of these new town projects did not come to fruition, speculators have suffered much. After Soe Thein, the minister for the President’s Office, announced that there was no plan for the Dala Bridge project, sales of land in Dala stopped. Investment in real estate has since shrunk.
Although the government can reclaim new land plots to regulate the real estate market, most plots have already entered private hands. For example, from 2008 to 2011, more than 3,000 state-owned plots were sold to private individuals or companies, and in 2011, many more state-owned plots were privatised. Thus, many plots reached speculators’ hands, and many were never used for anything.
New market condition
Last year, real estate prices rose steeply not only in Yangon but also in rural towns and economically important coastal regions. There were even those who bought whole small islands near coastal regions. In 2010, the price of plots worth about US$2,000 skyrocketed to around $50,000. These transactions were said to involve Chinese people and some rich politicians.
The housing demand in Yangon also encouraged the construction of new condominiums and apartments. However, they were not quite welcomed by the market due to very high prices. Without the mortgage instalments, these projects have no future, said Myint Mo Swe, retired deputy director of the Department of Human Settlement and Housing Development.
“The requirement for advanced payment has somewhat killed speculation. Developers are relying on advance payments to finance the construction. Without advance payment, as buyers took off because of the prices, they could not proceed with their development plans,” the retired official said.
Real estate agents said that the market is now heading towards a further slide.
Source: The Nation