Market slows but no bursting bubble

Real estate experts are backing away from their bullish stances of a year ago, expecting a quieter market for 2015.

While prices for most Yangon real estate may hold steady or decline somewhat in the year ahead, industry insiders say they don’t expect any property price bubble to burst completely.

Rising prices have already begun tapering, as government actions to hamper speculation and a slate of new projects attempting to woo investors combined in 2014 to chill the previously sunny market.
Many said expensive property created a barrier to doing business, with high prices said to dissuade some firms from setting up shop in Myanmar.

Mandaing real estate service managing director U Than Oo said he reckons the market will continue cooling over the coming months.

“Most investors are now only interested in projects that have nearly reached their potential,” he said. “The government’s term is nearly up, and real estate investors are watching the political climate because of the election.”

“It’s not only the local real estate market. Other sectors are slowing down. Real estate is only part of the economy,” he added.

Local real estate prices shot up significantly starting around 2012, surging until rent in some parts of Yangon rivaled that of international cities such as Singapore.

Some areas of the market have increased more rapidly than others. The city’s office space in particular has seen significantly higher prices, constrained by tight supply.

Colliers Myanmar noted that city-wide average office rental space, which cost US$16 a square metre (10.7 square feet) in Yangon in 2011, has now quadrupled to about $69 a square metre in 2014. Bangkok office space cost an average of 490 baht (US$15) a square metre in 2014, according to a January article in The Bangkok Post.

Colliers Myanmar added that rental prices are set to increase in the future, but at a more modest pace.
Occupancy rates for office space are also set to temporarily decline following the completion of sizeable new projects, though after investment sectors are further liberalise, an upward trajectory should continue in the medium to longer term, Colliers said in its fourth-quarter 2014 report on the Yangon office space market.

“We can assert the lack of international-standard office buildings this year will keep premium rental rates relatively stable,” it said.

Prices increased on general optimism about the domestic economy, as international investors increasingly entered the market seeking real estate space.
While office space has seen some of the highest price increases, Yangon property increased across the board.

Initiatives have been introduced in an attempt to restrict the rise in land prices. The government in October 2013 changed how it applies taxes on property transactions partly in an effort to slow the market, later adjusting the system in October 2014.

Yangon Region authorities also unleashed a torrent of speculation in August 2014 when mayor U Hla Myint announced – and subsequently suspended – an $8 billion city extension to the city’s southwest. The move attracted a rush of speculators to the mostly rural townships, which eventually subsided.

With speculation subsiding not only in the Yangon new city area but also slowing across much of the city, experts say there are not yet signs of a rapid price decline.

Economist U Khin Maung Nyo said that local developers and contractors rely less on bank lending for their projects than in other countries, meaning any price declines ought to be slower.

There are also few mortgage holders in the market, meaning most property buyers are financing through savings or outside of the banks.

“There is no bubble, but prices will fall slightly,” said Mandaing real estate service managing director U Than Oo.

The planned opening of the Yangon Stock Exchange may also take some steam out of real estate speculation, as investors have another outlet. Moe Lwin Real Estate Services managing director U Min Cho Oo said he does not expect significant competition for at least a couple of years from the exchange.

Source: Myanmar Times

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