Collier Property Report – CONDOMINIUM Q4 2017

Developers Downplay Launches

No new launches were witnessed as of end-2017, perhaps owing to the continuous wilting of Yangon developers’ optimism over the market’s current condition. While this year’s take-up per quarter trailed an upward route, Colliers believes that developers still need to reconsider their strategies. If the goal is to realize a sustainable improvement in the overall sales, we urge developers to think long term. Differentiation of offerings, adjustments in selling prices, and improvements in the onerous car parking regulation need to be grasped sooner or later in order to regain the buyers’ confidence in the market going forward.

Forecast at a glance

Demand

Rigorous product discounts continued to stir demand as at the end of 2017. We strongly encourage developers to rethink their strategies until necessary modifications in the car parking regulations are realised.

Supply

There were no new launches recorded as of Q4 2017. However, Colliers expects the highest estimated annual completion in 2018, totalling almost 6,000 units.

Take-up Rate

The cumulative citywide take-up rate witnessed an increase of about 7.5% YOY, owing to the lack of project launches.

Selling Prices

In Q4 2017, selling prices have further decreased across all segments. Rates are likely to become more competitive as supply becomes considerable in 2018.

No Movement in the Number of Units Launched

As a result of the lacklustre performance of Yangon’s condominium market, developer confidence has continuously weakened over the recent years. Owing to this, the volume of unit launches has considerably dampened. As of Q4 2017, Colliers witnessed no changes in launch statistics. The number of launched units ended the year with the Q3 2017 numbers, totalling only an approximately 860 units. This perhaps can be explained by some of the high-density developments failing to reach the necessary sales target leading launches for the successive phases to be shelved. Furthermore, projects expected to be unveiled in 2017 were delayed for an indefinite period as developers reconsider strategies and give their product offerings a facelift in a bid to recuperate buyers’ confidence.

Yangon Condominium Supply (No. of Units)

On the other hand, Colliers witnessed an improvement in Yangon’s condominium stock. Following the completion of Crystal Residences by Shwe Taung Development Co. Ltd., room supply reached more than 6,700 units as of Q4 2017, up by 3% and 25% on a quarterly and annual basis, respectively. Looking ahead, the future stock appears likely to remain substantial with more than 10,100 units due for completion in the span of three years. For the immediate year alone, Colliers is expecting 45 projects to be completed with nearly half of which are situated in the Inner City Zone. Paragon Residences by Global Resources, The Atrium by Yadanar Mying Construction Co. Ltd., Red Hill Mixed-Use Tower (Formerly known as KBZ Tower) by Naing Group Construction Co., Ltd., Kantharyar Residences by Asia Myanmar Consortium Development Co., Ltd., and Sky View by Shan Star, New Generation Engineering & Supplies Co., Ltd. are some of the sizeable projects expected in the area in H1 2018, collectively representing more than 950 units. Overall, we expect almost 6,000 additional units to be concluded in 2018.

Product Differentiation and Price Adjustments Need to Occur

Based on the Q4 2017 market performance, it will take almost four years for all the existing condominium projects in Yangon to reach sold out status. Colliers see project differentiation and price adjustments to remain as keys in ensuring that demand is sustained, as there are projects that are still not performing well. Given such conditions, there are important considerations that developers must be aware of to properly position their projects.

Colliers believes that the one of the most vital element in any development is location. Accessibility is all the more important especially with Yangon’s traffic situation. As such, proximity to places of work and other supporting components is a major concern for tenants and buyers alike.

Another consideration is the construction and service quality. The quality of the structure, finishing, design and space offerings and even the reliability of the project management are now considered in the selection of units. It is highly advisable for developers to think ahead even prior to the project launch.

Lastly, the recreation aspect of the project: lifestyle is of increasing relevance today as the market targets early nesters and families. It is no longer a question of how the unit is built but also the amenities that a development can offer. Apart from the common amenities like swimming pools, gyms, etc., the integration of “nice-to-have” amenities like indoor and outdoor pocket gardens, sky lounges, mini-theatres, play grounds, and barbecue pits could perhaps be a good pull for buyers looking ahead.

However, the majority of Yangon developers still have not recognised these factors. In fact, the weakening sales of developments which resulted in an overall sluggish construction activity was due to the observed absence of improvements.

Yangon Cumulative Pre-Sales Take-up Rate

Despite the established sheer record of completion and launches as of 2017, the cumulative citywide take-up rate witnessed an increase of about 7.5% from 2016’s 53%. The downward flight observed in selling prices alongside developers’ extensive marketing promotions can also explain this occurrence. In fact, as at the end of 2017, condominium prices in Yangon ranged between USD167,700 and USD634,200, from a midmarket to a luxury category. While prices have witnessed a downward correction over the last three quarters, the amount remains substantial.

Overall, there remains a widely untapped demand for low and middle-income developments and that affordability is still a main concern amongst majority. Still, the high land values along with an onerous car parking regulation make it difficult for developers to justify more competitively priced products with smaller unit sizes. Colliers believes that improvements in the regulation allowing smaller unit offerings could also help address affordability. Similarly, some banks are now offering loan programs with 15-year instalments. Adopting flexible payment terms and options should help facilitate improvements on the overall sales performance of the market going forward.

Source : Colliers International Myanmar

For more information:

Karlo Pobre
Associate Director
Research & Advisory
+95 (0) 979 573 3378
Karlo.Pobre@colliers.com

The Htet Oo
Assistant Manager
Research & Advisory
+95 (0) 943 190 707
TheHtet.Oo@colliers.com

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