Q3 2015 Yangon Real Estate Review now available

Posted on: 05/11/2015
 
Our latest in-depth report on the Yangon real estate market is now available to purchase.
 
The Q3 2015 Yangon Real Estate Review contains more than 240 pages of information, covering residential and commercial market analysis, developer profiles, data, legislation, maps, district-by-district profiles, and comprehensive details and maps of over 80 ongoing or future property projects in Yangon.
 
Researched during the past three months by our local and international staff in Yangon, this is an essential resource for companies involved in the Myanmar property and construction sector, including developers, investors, banks, building materials suppliers, contractors, engineering firms, architects, project managers and others.
 
 
 
 
Key findings from the report include:
 
  • Following a sharp slowdown in off-plan residential sales since late 2014, the pace of decline in uptake has levelled out over the past two quarters. Mid-range condominium projects have continued to perform reasonably well, boosting uptake in an otherwise slow market. Ongoing uncertainty over planning, zoning and ownership issues, exchange rate volatility, overpricing of projects and more general caution in the run-up to the November 2015 elections are all likely to continue to dampen the market in the short term. 
  • In Q3 we recorded just one major project launching sales, the mid-range Mya Kan Thar Condominium by local developer iGreen Construction, compared to five notable project launches in Q2. This new condominium entered the market at an average off-plan asking price of $218 per sq ft, a price point comparable to the Q2 weighted average of $207 per sq ft across all newly-launched projects. It is likely that strong sales performance at more moderately priced projects will help to keep this average down, and attract a greater number of buyers. 
  • New entrants to the residential market include Myanmar International City Development, while Singapore-based serviced office firm Arcc opened its first Yangon office space in September. Elsewhere in the construction sector, Thai firm Christiani & Neilsen opened its Myanmar subsidiary this quarter, and German chemicals giant BASF opened its first representative office. 
  • Though the number of new local and international entrants was much lower this quarter, the post-election period is set to witness a flurry of activity, with numerous large-scale project launches on the cards. Min Residences (614 units) by Oxley Myanmar and the second tower of The Lake Suites (226 units), the residential component of the mixed-use HAGL Myanmar Centre, both plan a November launch, followed by Tritone (424 units) by Hanwha in early December, and the 12-acre mixed-use Project Pioneer by KT Group later that month. Another major mixed-use project called Inno City (744 units) at the Parami Bus Terminal is also planning to launch by November.
  • Project cancellations and delays have also increased uncertainty in the market. The cancellation in early July of five projects close to the Shwedagon Pagoda, most notably the high-profile Dagon City One, has sharpened existing concerns about zoning and planning in Yangon, and raised questions about investor protection in Myanmar. The MIC subsequently announced that the government would provide alternative sites for the projects, but these were still thought to be under negotiation as of the end of September.
  • The Myanmar Kyat continued to decline sharply against the US dollar at the beginning of the quarter, levelling off in August and September. Overall, a weakening of the local currency by almost 20% since the start of the year has increased construction costs for developers and contractors, and heightened general uncertainty. A number of projects are now converting their pricing to US dollars for greater security. 
  • We estimate that private-sector developers intend to build around 18,000 high-end apartments in Yangon by 2019, though an increasing number of delays and cancellations mean developers' targets will almost certainly slip further.
  • Though Grade A office supply is steadily increasing, high prices continue to deter potential tenants. This quarter, four new office buildings were completed, in addition to one smaller project, adding a total of around 18,000 sq m of new, purpose-built supply. Major new projects – most notably the HAGL Myanmar Centre, and a number of smaller office buildings – are scheduled for completion in Q4 2015.
  • Asking prices for office space have flattened and are now falling, reflecting demand for more moderately priced premises. Based on our research, developers plan to build at least 750,000 sq m of new Grade A space in Yangon by the end of 2018, but as with the residential market, this is likely to be pushed back due to delays and cancellations.
  • Major new pieces of legislation on the property sector are unlikely to be approved until a new government is formed after the 8 November elections, and likewise the opening of the Yangon Stock Exchange (YSX) is now scheduled post-election. The latest draft of the long-awaited Condominium Law contains a number of key changes, which may significantly increase the amount of projects able to obtain condominium status. 
  • Following the approval of a new urban expansion plan for Yangon in Q2, the regional government issued a tender for the fast-tracked south-west portion of the scheme. The Ks3.1tr ($2.6bn) expansion covers land from the Pun Hlaing river confluence to Twante creek. Of the 54 companies that purchased tender documents, three officially submitted bids, though a deadline for the next stage of the process has yet to be announced. 
  • Government-led affordable housing projects have continued to make progress this quarter, including schemes for sale and for rent. The completion of the Bo Ba Htoo project makes it the first to finish this FY, with the Ka Naung and Bo Min Yaung developments to follow in early Q4. Provisional pricing has been revealed for the largest of the current administration’s projects, Ayeyarwun-Yadanar. Strong interest has been shown in a pilot scheme for industrial worker housing, with two more housing projects getting the green light. On the private side, The Infrastructure of Myanmar Group announced four new affordable housing projects across Kayin State and Sagaing Region, all offering 30-year payment plans.
  • Flyover tenders were awarded to several local companies this quarter, and construction is now underway at all sites. Progress has also been made on pedestrian overpasses across some of Yangon’s busiest roads, and a new bridge has opened connecting Mingalar Taung Nyunt Township with Dawbon Township. However, upgrades to the city’s circular railway stations are proceeding more slowly, with a second EOI issued for Yangon Central Railway Station and a lack of bidders for the Pazundaung Railway Station yard development. 
  • Despite market uncertainty, official figures show that the Yangon City Development Committee (YCDC) issued a record number of construction permits in June. Between 1 January and 31 May, it approved 1,600 high-rises, 1,490 low-rises and 81 fences. YCDC has also issued over 1,300 building completion certificates (BCC) so far this year. YCDC approved a total of 147 high-rise buildings over 12 storeys in height between 2003 and August this year.
  • Our short-term outlook is for continued slow sales at the higher end of the market until at least the end of 2015, with the potential for further delays, cancellations, and possible defaults or developer bankruptcies. In this quarter, the chairman of a key player in the Myanmar construction market indicated that many of the country’s largest construction companies are in debt due to the current situation, indicating that the sector needs ongoing support.
  • Despite the current situation, we believe that the underlying long-term fundamentals for the Yangon property market, such as economic and demographic growth, remain solid. A successful election will trigger another wave of new entrants and renewed interest in the country moving into 2016. 
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The report is priced at $1,600, and can be ordered through the website or by phone.
 
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To order by phone, please call +95 92 5334 9604, or email our Business Development Director, Michael Guarino, on michael.guarino@frontiermyanmar.com
 
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Frontier Myanmar Research provides local research and analysis for companies and organisations operating in Myanmar, one of the world's most exciting economies.
 
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