Winds of change in Yangon’s rental market

Robin Aung Saw Naing is the managing director of Pronto Services, which is viewed as Yangon’s leading real estate agency for expatriates. He talks to Mizzima Weekly’s Jessica Mudditt about why things are changing for the better when it comes to renting in Yangon.

When we last spoke at the beginning of 2014, you said that prices in Yangon had risen 100 percent. Has the city’s notoriously high rental prices started to plateau?

Yes. Since the beginning of this year the prices have gone down significantly. This is because a number of large condominium projects have been completed. But it’s also true of house prices and prices in the downtown area. I’d say that prices are 20 percent lower than what they were last year.

Last year it was a seller’s market, whereas now I’d say it’s a balanced market because renters have so many more options. And landlords are becoming more flexible as a result. They are now accepting payments by bank transfer and six month installments are a lot more common – recently a landlord agreed to three months, which was an absolute first. I’d say that 80 percent of landlords are now willing to accept six months rather than twelve months as upfront rent.

If rent prices are decreasing, does that make business better or worse for Pronto?

It makes it better, because the way we operate is to charge one month’s rent from the landlord and nothing from tenants. Last year there were a significant number of people coming to Myanmar to work as volunteers for INGOs. They didn’t have much money to spend on rent and most were here for a short period of time. So what most did was to band together and share a place rather than finding a place of their own. This means that fewer places are being rented and we receive less in commissions.

But isn’t it true that there are few studio apartments in Yangon?

Yes it’s true – there is a demand for them, but there are virtually none. There’s a common perception among home owners that the more rooms you have, the higher the price a property will fetch. So there are a lot of homes that are, say, 800 square feet and have three bedrooms – but they are very small and narrow bedrooms.

What are your long term predictions for the property market?

I think it’s going to collapse, and I’ll tell you why. There is construction on almost every street corner nowadays and I read a piece of analysis recently that said that if all these projects were to be finished in 2015, there will be 60,000 new apartments.

And the thing is, even before construction starts, the company owner will open a gallery and showroom because they need to find enough income to start the project. The developer has to have enough money to finish the project, but the pre-sale market is very low. The developer could try to get a bank loan but they’ll be refused unless the business has potential. As the income from pre-sales is typically almost zero, no income whatsoever has been generated. What happens next? If a project has to be delayed, compensation must be paid to those who purchased apartments because they’ve signed contracts stating that it would be complete by a certain date. Already we’re seeing the cost of condos decreasing quite substantially.

Is there anything that can be done to avoid a collapse?

The problem is being caused by a lack of urban planning. It’s mismanagement on the part of YCDC: they’re giving construction licences to everyone that applies. And many of these people haven’t done any analysis – they just see that the market is new and good and just follow what others are doing.

Has YCDC’s tax scheme played a part in stabilising the market?

No, it’s not working. The government tried to control prices but the people simply aren’t following it. Taxation doesn’t work in Myanmar. For example, I went to a local tax office recently to pay tax on behalf of a landlord. There were about 60 office staff but not a single computer. So how can they control things? Government systems are very weak, so they try to use manpower instead. But there isn’t enough manpower. And government offices and departments aren’t working together – YCDC, tax, immigration – they’re all under different ministries and there’s no collaboration between them.

How long do you think it will be until it becomes a renters’ market?

I’d say 2016. It will be great – renters will have a lot more room to negotiate. But the most important thing is that it will be possible to find high quality apartments. I’d also say that most Myanmar landlords do want to rent their apartments to expats. The reasons vary – one is that they believe they will get more money; another is that expats tend to take good care of the homes they live in. Although that’s not true of all of them… Of course some landlords are tough, but most aren’t difficult to negotiate with. They like foreigners and they want it to work – particularly when there’s mutual respect.

Source: Mizzima

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