Condominium Market in Yangon 1H, 2015

Research & Forecast Report
Yangon | Condominium Market
1H 2015

Sales continue to dampen; project launches to hit new record low this year

The number of condominium units launched in 1H 2015 continued to be robust despite the weakening sales performance from both new and old projects.
The sales take-up rate dropped significantly by 20% HoH, as buyers become more cautious given recent market developments.

Going forward, one and two bedrooms are seen as viable investment options with reasonably smaller sizes translating to a more affordable average unit price. However, the current car parking regulation hamper the viability for smaller size condominium units.

Forecast Direction

Project launches to witness first decline this year since 2012
The number of new project launches continued to surge despite the consistent drop in demand over the past year. Some 10 projects, collectively includes additional phases and new developments, initiated pre-sales in 1H 2015, translating to 2,686 units launched. The number is 16% higher than the same period in 2014, and more than triple than that of 2H 2014.

New Condominium Project Launches
The rise in launches were mostly driven by Golden City (Phase 2) blocks 5 to 7, together consisting 582 units. This is being followed by the Galaxy Tower at Thanlyin Star City with close to 500 units.

A similar high-density but new development, Swe Daw City, was also launched in the same period. To be located in Mingaladon Township, the project is being developed by a known local retail player Gamone Pwint.

Some other notable condominium projects launched in the first half of the year include Pyay Residence by Noble Twin Dragon Pte. Ltd, The IVY by Aspidin Construction & Trading Co., Ltd. and Rose Hill Residences by Soilbuild Group Holding Ltd.

A big majority of the recently launched developments are to be located in the Outer City Zone as large land plots remain widely available in this vast area. To date, the zone represents 52% of launched projects in the city. The number is expected to heighten in the future as many developers and investors are discouraged with the generally high land prices dictated in Downtown and the Inner City zones.

In the meantime, new project launches is projected to slow down in the near future given the worsening market sales performance; and while developers are in a holding pattern in lieu of the upcoming elections and subsequent new administration in 2016.

Some new projects initially slated to be launched in 3Q 2015 are now being held back and deferred at least until early-2016.

Moreover, the absence of a condominium law continues to stall potential new foreign entrants from investing in the market. Colliers predicts that the number of unit launches in 2015 will be below 2014 level, to register its first decline since 2012.

Notable Pre-selling Condominium Take-up Rate

The city-wide average take-up rate of pre-selling condominiums in Yangon witnessed a new record low, which ended at a dismal 49% in 1H 2015. The rate dropped by a significant 20% from 2H 2014.

Besides the substantial rise in project launches, the sluggish sales take-up was largely driven by the weakening market confidence.

Buyers are now beginning to become more cautious and mindful with their purchasing process in view of recent market developments, particularly delays in construction and project cancellations – worsened by the lack of regulation enforced to protect buyers and developers rights.

Notable Preselling condominium take up rate

Average sales price by segment (USD-SQ M)
The market similarly fails to recognize the potential demand for the low to mid-market segments as there remains a large stock of upper-mid to luxury projects – representing close to 80% of all the pre-selling condominiums in Yangon.

The mid-market segment, with an average price of USD 1,637 per sq m or about USD 225,000 per unit, continued to perform relatively better which registered a take-up rate of 57%.

Meanwhile, both the high-end and luxury segments recorded a significant decline in take-up rates.
The high-base unit prices, driven by the large unit sizes, have somewhat discouraged growth in real demand, being unaffordable to the majority. This has also driven some speculative buyers to withdraw from their investments, struggling to fulfil their financial commitments to the developers. In fact, default rates have been evident in some pre-selling projects which registered 15 to 20 withdrawn purchases in the first half of the year.

As at the end of 1H 2015, the total unsold inventory has increased significantly to 6,654 units, double than in the whole of 2014.

Reasonably sized one to two bedrooms – key to future investments

With the increasing number of single and young couple expatriates in Yangon, owed to the lack of facilities to support large household expatriate requirements, well-planned condominium developments with reasonably sized one and two-bedrooms are expected to be in high demand in the long term.

Yangon Condominum Stock by configuration
At present, there is a disproportionate number of large units in the city with three and four-bedroom types accounting for 85% of the existing stock. With the increasing preference for smaller type units, some projects have now been designed with one and two-bedroom types, altogether representing 37% of the future total stock. This is a significant rise from the current stock of 15%. Similarly, the unit sizes will consequently narrow from the existing average of 112 sq m down to 73 sq m for a one-bedroom type.

The introduction of more one and two-bed room types will help facilitate growth in sales going forward as smaller unit sizes translate to a relatively more affordable unit price. More investment-led purchases are seen to occur as buyers become guided by the rental potential on expatriate demand. However, the current car parking regulation imposes a key challenge among developers. The onerous car parking space requirement of one plus 20% per unit hampers the feasibility of smaller unit types distorting the market in favour of larger units.

For more information please contact:
Karlo Pobre
Research Manager
Research & Advisory
+95 (0) 931 336 099

Adrian Soe Myint
Analyst Research & Advisory
+95 (9) 976 895 535

Tony Picon
Managing Director | Myanmar
+95 (0) 942 103 4026

Colliers International
Unit 7/C (6th Floor)
White Cloud Building,
No. (138/142) Thein Phyu
Road, Botahtaung Township
Yangon Myanmar
TEL +95 (0) 931 491 678

Source: Colliers International Myanmar

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