Real estate prices in Myanmar will likely settle down in 2014 -- despite a continued rise in demand -- after skyrocketing during all of 2013. The country's recent draft condominium law could result in a better environment for foreign investors, but many will likely want to wait until after the 2015 elections to gain a better idea of the country's political stability before committing to the lucrative but risky environment.
As more foreigners moved into Myanmar in 2013, either for business or personal reasons, demand -- and subsequently prices in the housing market in cities like Yangon -- skyrocketed. In 2014, that demand will continue to rise by 60 percent above 2013 levels, Mizzima, a Burmese newspaper, reported. Thankfully, that does not mean prices will rise with demand.
“Property rental prices cannot rise much further because the cost of renting most types of accommodation reached its highest level in 2013,” said Ma May Htet Aung, the managing director of Power 7 Real Estate and General Services.
Both domestic and foreign property developers have begun building apartment buildings, which should ease the shortage of high-end apartments to some degree, providing a stabilizing factor for real estate prices.
“Some of these projects will be finalized by the end of 2014, and the surplus apartments can reduce rental prices in Yangon to some extent,” Ma May Htet Aung said.
The civilian government, which took over in 2011, made progress in pushing through other economic and political reforms in 2013, especially in its bid to attract foreign investment. A draft of the Condominium Law was published in November, and it still awaits approval from the parliament. If passed, the law could bring much-needed security to transactions in the real estate industry.
“It will result in a safer environment for foreigners who want to buy units, and it will resolve negotiation problems in transactions when [real estate companies] deal with foreign clients and sellers,” Ma May Htet Aung said, according to Mizzima.
Under the draft law, registering a unit in a condominium building with the government is compulsory, whereas previously, locals often used private documents as proof of ownership to avoid paying property taxes. In addition, the draft law allows foreigners to purchase units directly.
In terms of investment, many foreign investors in the real estate and building business have adopted the “wait-and-see” attitude to better assess political stability in the newly opened nation. Growth in the building industry will likely remain modest before the end of 2015, when elections will take place, but they will take off soon thereafter so long as political stability holds.
“We are forecasting real growth for the sector to average 10.8% per annum between 2016 and 2023, making it one of the fastest growing construction markets in Asia,” a report from Business Monitor International (BMI) said.