What's Missing From The Yangon Real Estate Market?

DESPITE A BOOMING REAL ESTATE MARKET, YANGON IS STILL LACKING IN ONE KEY SECTOR. VERITY RAMSDEN, OF YANGON REAL ESTATE CONSULTANCY SLADE PROPERTY SERVICES, INVESTIGATES.

The current popular narrative concerning the Yangon real estate market is something of a negative one. The general consensus is that the market has peaked. Prices, it is said, are only going to head downwards from here, if they haven’t already done so. The press is full of articles on dropping residential rents and doom and gloom stories about the unviability of many of Yangon’s proposed condominium schemes.

However one market that cannot be included in this negative trend is the serviced apartment market. In fact, out of all types of Yangon real estate, this is the one area where the narrative has barely changed in the last few years.

For a start, Yangon still has only a handful of serviced apartment schemes. A few small-scale projects have emerged in the last few years, but these rarely offer the same facilities and level of service to put them in the same league as well-known and oversubscribed properties such as Shangri-La and Sakura Residences. Many of the new, large, mixed-use developments focus on condominium units for sale, and provide little or no new serviced apartment stock. This could be because serviced apartments require more management and provide a regular income rather than an immediate return on capital. Whatever the reason, it means that we are unlikely to see much new stock for several years yet. As a result of this lack available stock, demand remains much greater than supply. Consequently, rents remain high and many schemes have considerable waiting lists.

But why is this sector so popular? To answer this, one has to look at over all Yangon residential real estate conditions.

Firstly, very few residential condominium schemes provide facilities such as swimming pools, gyms, and concierge staff. These types of facilities are standard in most condo buildings in Bangkok, KL and Singapore, whereas currently the only requirement to be classed as a ‘condo’ here in Yangon is to have a lift! Therefore, many people are flocking to serviced apartment properties simply to benefit from facilities which are hard to come by elsewhere in Yangon.

Secondly, flexibility of tenure is still an issue. The majority of residential contracts are still for a minimum of one year, and most (although not all) landlords request an entire year’s rent paid upfront in cash. This makes it very hard for speculative or short-term residents of Yangon to find a place to stay. Serviced apartments generally operate on rolling contracts and allow much more flexibility for tenants.

So what is the future for serviced apartments in the Yangon real estate market?

In the short term, the serviced apartment market looks to remain buoyant, with tenants paying a premium for those perks they just can’t get elsewhere in the Yangon real estate market.

In the longer term, it may be that we see supply increase and perhaps even demand decrease; but this will only happen if regular condominium buildings improve the facilities they offer, and if landlords start to allow more flexibility of rental payments and lease terms. Both of these are beginning to occur, but it’s still very early days.

Such changes, when they eventually occur, will be welcomed by tenants.In the meantime, however, serviced apartments remain a real estate sector with real potential for developers and investors in the Yangon market.

About Slade Property Services: Slade Property Services (Myanmar) Ltd is a privately owned real estate advisory company based in Yangon, Myanmar, founded in 2013 by Hugo Slade BSc (Hons) MRICS. Every day, SPS transacts and provides advice upon real estate assets in Myanmar. Through our active participation in local markets, we benefit from data on current rents, prices and market information. This insight is essential particularly in markets like Myanmar where there is limited transparency. By engaging our services, you are accessing the experience of all of our service lines, including: