fbpx

Colliers Property Report – Colliers Myanmar Condo Q4 2018

SUMMARY & RECOMMENDATIONS

Towards the end of 2018, the citywide take-up rate remained below the 60% mark. Given the relatively poor sales performance of majority of condominium projects in Yangon, we embolden developers to start expanding their target market and introduce more low and mid residences. We predict that lower-tier but modern apartments and condominiums will witness better sales performance. Similarly, buyers are likely to gain more confidence towards basic but modern developments, smaller in size and priced more reasonably. The eventual proliferation of mortgage and deposit provisions is seen to change the residential market, which traditionally has been out of reach for majority, especially low and middle-income earners.

DEMAND

Demand for low to mid-tier projects remain untapped. Providing favourable mortgage and deposit arrangements should bolster demand across the residential market.

SUPPLY

Both figures of completions and unit launches increased as of Q4 2018 In 2019, we anticipate the total stock to reach a new record high, with most projects to be situated in the Outer City.

TAKE-UP

Colliers recorded a point increase in the citywide take-up rate. We see the rate to realize a slight drop in the succeeding quarters given the surge of future developments in 2019.

PRICE

Prices ranged between USD200,000 and USD800,000, from a mid market to a luxury category. Colliers believes that rates will become more competitive as supply builds up in the next three years.

AGGREGATE SUPPLY TO HIT RECORD HIGH IN 2019

As of Q4 2018, Colliers witnessed a meager increase in the total number of unit launches. Ngapali Construction Co., Ltd. ‘s New World Residence, Nan Htike Taw Win Residence, and Royal Phoe Sein Avenue Residence were the only condominium projects launched this quarter, prompting a 4% QOQ increase in the citywide launch figures. On the other hand, an uptick in the overall condominium stock was recorded. The completion of 14 projects this quarter delivered more than 1,380 units into the total supply tally. Looking closely, the completed projects are mostly situated in the Inner City Area and are mostly under the upper-mid segment (e.g. Golden Link Condominium by Htike Sin Co., Ltd., Space @ Yankin by Crown Roofing Company, Red Hill Mix-Use Tower by Naing Group Construction Co.,Ltd.).

Figure 1: Yangon condominium stock, (rooms)

Source: Colliers International

While Colliers recognizes these upturns, majority of Yangon developers’ view of the market remained generally gloomy. Similar with the past trend over the recent years, several projects that were announced to be unveiled within the quarter either delayed their respective timetables or shelved some phases of their developments, owing to the underwhelming market sales performance. This scenario should strongly motivate developers to revisit their strategies and give their offerings an overhaul in order to ease buyers’ averseness towards the market.

Looking ahead, the future stock appears likely to remain substantial with more than 9,000 units due for completion between 2019 and 2021. For the immediate year alone, Colliers expects the citywide stock to reach a new record high, with an annual addition of more than 6,800 units. Out of the 41 projects set for completion in 2019, 56% of which is situated in the Outer City Zone. Kabaraye Executive Residences by Living Square Co., Ltd., Paw San Hmwe Residence Building A & B by Mya Thet Tin Construction Co., Ltd ., Diamond Inya Palace by Mandalay Golden Wings Co., Ltd., Thanlyin Star City by FMI, Inno City by Inno Group, The Spring Line Residence by Shwe Oak Khai Construction, Time City by Crown Advanced Construction Co., Ltd., The Century by Htun Myat Aung Co., Ltd., and Ayar Chantha Executive Condominium by Chantha Shwe Myay Construction Co., Ltd. are some of the developments scheduled for unveiling in such area, collectively representing more than 2,860 units. Meanwhile, we expect 46% of the aggregate 2019 supply pipeline to be introduced in the Inner City Zone. The Infinity by KHG, Golden City (Phase 2) by Golden Land Real Estate Development Co., Ltd., 68 Residence by United GP, Kanbae Towers by Golden Thitsar Co., Ltd., The Yar Pyae Luxurious Condominium Tower A & B by Aung Kaung Kyaw Group of Companies, and Myat Mingalar Condominium by Myanmar Seilone Construction Co., Ltd., are some notable projects expected in the area. Overall, supply is seen to significantly grow in the next two to three years, on the back of the government’s initiatives in implementing more reforms.

Figure 2: 2019 Yangon condominium stock by location, (rooms)

Source: Colliers International

CREDIT BUREAU TO PROMOTE GROWTH IN REAL ESTATE MORTGAGES

Colliers believes that one of the major aspects constraining the development of the real estate industry, especially the residential sector, is the lack of a mature mortgage market. According to Myanmar Real Estate Association (MREA), uncertainties on guidelines associated to immovable property rights and ownership records are two of the key causes as to why a mortgage culture has not yet developed in Myanmar.

After promising growth in the first few years after political and economic reforms arose in 2011, the industry has struggled to sustain its pace in recent years. Jurisdictive efforts to strengthen investment in the sector and stimulate growth in the mortgage market include the 2016 Condominium Law and the subsequent enabling rules and notifications enacted between 2017 and 2018.

Although the rules were initially hailed as a potential boost to the real estate market, there remains a lack of clarity regarding their implementation. Key aspects of the new rules include a definition of what constitutes a condominium – a building that is at least six stories high, built on collectively owned land and registered under the Condominium Law. It also includes a stipulation that allows foreign investors to buy up to 40% of the units in a condominium block, as well as the right to transfer, lease and mortgage their ownership rights.

One aspect of the new rules that has been billed as offering the most potential for the growth of mortgages is the introduction of unit registration certificates (URCs), which provide evidence of the ownership of individual apartments, similar to what is known as strata titles in other countries. As stipulated in the rules, the person whose name appears on the certificate will be the legal owner of the condo unit and can use the URC as security for a bank loan. However, lingering confusion over the implementation of the rules meant that they have not had a significant impact on the mortgage market in 2018.

Figure 3: Yangon cumulative pre-sales take-up rate

Source: Colliers International

Likewise, access to capital remains a major hindrance for those who want to buy their own property in Myanmar. This stems from the fact that affordability remains unaddressed. This very reason explains why sales performance of majority of condominium projects in Yangon remain at a low-slung level. In fact, as of Q4 2018, the citywide take-up rate remains at sub-60% level (See Figure 3). While developers continue to introduce more upscale projects, buyers are similarly becoming more mindful with their purchasing process in view of recent market developments. In terms of average selling prices in Yangon, condominium projects are sold at a range between USD200,000 and USD800,000, from a mid market to a luxury category. While the prices have witnessed downward correction over the last three years, the amount remains substantial. Besides the generally high development cost (land and construction) Yangon’s unreasonable condominium prices are driven by an overall mix that is geared towards larger unit sizes. This has contributed to concerns that some developers could not finish their projects because funding is often reliant on pre-sales. In part due to a lack of clarity regarding the condominium rules, the surge in property purchases that some had anticipated has not yet occurred, but there are indications that moves by the government to ease foreign ownership of private property may have contributed to increased trust from the country’s lenders, many of which have only traditionally loaned to clients that are well-connected and able to meet onerous collateral requirements.

In the coming years, Colliers sees that the demand for credit will remain strong, and banks could deliver more diversified products to serve their customers. The introduction of term loans helps the banking sector to play a more important role in channeling savings to longer-term loan demand from the various sectors, especially real estate. On the retail banking side, while diversification is still at a very early stage, more banks are likely to start offering mortgage loans with flexible payment terms (e.g. down payment stretched up to 25 years as is a market practice in neighbouring countries) to finance residential projects.

In fact, private banks are gradually diversifying their housing mortgage programs within the confines of the 13% interest rate cap imposed by the Central Bank of Myanmar (CBM). In Q4 2018, Yoma Bank announced that it will offer home loans with 25-year repayment plans and 30% down payment for units at either of the three projects under development by its sister company, Yoma Land. Another of the country’s lenders, AYA Bank, announced in March 2018 that it would provide 15-year loans for 4,000 residences, also at an annual interest rate of 13%, with a 30% down payment. The loans are available to any Myanmar citizen over 20 years of age with a “stable and reasonable income”. This in fact has to be defined. In other countries, the monthly down payment should equal to at least 50% of the household’s combined monthly income. Meanwhile, the licensing of the country’s first credit bureau in May 2018 should make it easier for financial institutions to conduct risk assessments of home loan applications and lessen the need for onerous collateral commitments. Overall, Colliers is positive that this initiative could potentially be a fast-growing market in 2019 onwards.

For more information, please contact:

KARLO POBRE
Deputy Managing Director| Myanmar
+95 (0) 979 573 3378
Karlo.pobre@colliers.com

NB: The best way to find information on this website is to key in your search terms into the Search Box in the top right corner of this web page. E.g. of search terms would be “property research report”, ”condominium law”, “Puma Energy”, “MOGE”, “yangon new town”,”MECTEL”, “hydropower”, etc.

.

Looking for foreign investors to invest in your business in Myanmar