For expats in Myanmar, most of which are moving to the country’s business hub of Yangon, searching for a reasonably affordable apartment or office in the city used to be a nightmare.
Because there are far too few new developments with condo units or offices and not enough existing living and working space at Western standards to meet the ever-growing demand, rentals prices for prime property were skyrocketing over the past years after the country opened its borders for investors, businesses and visitors. Annual supply of new units usually satisfies only one-third of demand, local realtors say.
Reaching a peak in 2014, rental prices for prime property in the town centre spiralled to the level of New York or Hong Kong, with tiny 30-square-meter condos commanding monthly rents of above $2,000 and larger one- or two -bedroom flats costing a up to a whopping $7,000 per month, whereby the quality of building maintenance, public services and utilities are usually far below international standards.
Adding to the misery, most landlords in Yangon insist on a yearly contract and demand a full year’s rent to be paid in advance, preferably in cash and either in (fresh) US dollar notes or in bundles of the local currency, the kyat, rather than through a local bank account which still few of them have.
Office rents used to vary between $3,000 and $4,000 for a small unit, mostly a townhouse, located away from the town centre and from $12,000 to more than $25,000 per month for an office in the city centre that would house between 20 and 50 staff. Last year, reports caused an international outcry after the UN Children’s Fund, or Unicef, admitted that it pays $87,000 per month for its villa-like office in the up-market Golden Valley neighbourhood of Yangon, calling it a “good deal” and “the best we were able to find”. Other outings followed, with the World Health Organisation (WHO) saying that it is paying around $79,000 per month for its downtown Yangon office. The public irritation was not just about the price, but also for the fact that such astronomical rents are being paid to high-ranking army figures and other members of Myanmar’s establishment — who usually own most of the prime property in the country — from budgets allocated for social agendas and humanitarian aid. The WHO, for example, pays almost 11% of its annual budget to rent its Yangon office, money that could otherwise be used for medical care or to improve healthcare facilities throughout the country.
Businesses that require shops to reach out to customers are even worse off. A local housing material company reportedly pays around $230,000 monthly for a furniture and hardware showroom located alongside a major avenue in Yangon, saying that it actually considered itself “lucky to have found such a spot”. Others, such as convenience stores and the growing number of car companies that require lots of showroom space at frequented places have partly delayed their investments for the lack of good locations for their businesses.
For companies setting up business in Yangon, it has become extremely difficult to attract expat talent without granting a generous relocation package and housing-related benefits. This includes companies that need a lot of manpower such as mobile phone companies Ooredoo and Telenor as well as the many foreign oil and gas companies flowing in. For younger entrepreneurs without such packages, the choice is either to lodge in the office or look for an apartment in one of the decrepit buildings in downtown Yangon which normally lack functioning utilities and services, let alone TV or Internet connection.
However, since the last quarter of 2014, real estate managers notice that prices have been stabilising, with rents for luxury apartments in some parts of Yangon even declining by about 10%, likely heading for further drops after rising two- to fourfold since 2012.
The reasons cited for this are, on the one hand, that the number of investors flocking into the country has gone down with the political situation becoming uncertain ahead of the general elections in 2015. On the other hand, many foreigners were shocked by the excessive real estate speculation that caused prices spiralling out of control, and many embassy staff and foreign businessmen that used to rent houses were moving to relatively cheaper condos or apartments, which triggered the government to intervene and introduce tax measures for property deals to cool down the market and kick-off several low-cost housing programmes. With high rents expected to level off further, prices could eventually become more sustainable which would be in Myanmar’s own economic interest.
Source: Gulf Times