Prior to the outbreak of COVID-19, residential real estate in Myanmar had already been going through a somewhat precarious period. In recent years, Myanmar’s residential market has descended significantly from the heights it reached in 2014/15. An undersupply of quality residential stock before 2014 caused developers to rush to meet demand. Condominiums in Yangon were among the first real estate assets that received investment following this spike in demand in 2014, as developers believed demand would rise even further with the relaxation of economic sanctions and transfer of government in 2015. However, these demand expectations were not realised but supply continued, and still continues, to rise across Myanmar regardless. With the focus largely on Yangon and Mandalay, these markets quickly became oversupplied with residential stock causing rental rates and sales prices to fall, with condominium sales particularly suffering. Condominium sales have further suffered as developers have been inclined to build a high quantity of large two- or three-bedroom units rather than studio and one-bedroom units. With these units being significantly larger than their regional counterparts, this has meant higher prices. The justifications that developers have had for these high prices include, high land prices, high interest rates at 11-13% and YCDC parking regulations. The YCDC parking regulations are particularly restrictive as they state that developments must have 1.2 parking spaces per unit. Dylan Wang, Investment Director at the Emerald Bay project, where 10% of units are one-bedroom units and sold out very quickly, told SPS that this regulation has played an integral role in discouraging the construction of studio or one-bedroom units as the additional parking is “expensive and not easy to sell”.

Once it had become clear that condominiums were not performing at the expected level, developers turned their attention to high-end serviced apartments and this sector also became oversupplied. With that being said, there is still a market for mid-range toowoomba plumbers serviced apartments as this is a sector that has been largely untapped and increasingly appeals to Myanmar’s young and growing middle class

Although COVID-19 emerged in Wuhan in January, it was not until March that the virus began to have very serious implications for Myanmar. Even at that point it was difficult to assess the impact that COVID-19 was having on the residential market in Myanmar. However, by mid-April, and with governmentimposed lockdowns in effect, COVID-19’s influence had reached almost every aspect of the economy, including residential real estate. Although a number of developments were quick to utilise online platforms and offered virtual tours to prospective tenants, the uncertainty of the situation saw new sales and leases almost grind to a halt. Stephen Purvis, CEO at Yoma Land, told SPS that, “sales across the board effectively stopped just before [Thingyan] as the country went into lockdown.”

The uncertainty surrounding COVID-19 during these initial stages resulted in a mass exodus of foreigners from Myanmar as a number of governments recommended that citizens return to their home nations. This meant that there was a slight increase in the number of available residential units for rent as many, but not all, foreigners were forced to terminate their residential leases. This put further downward pressure on rental rates across Myanmar.

A number of condominium leasing teams, including The Leaf Residences and Golden City, told SPS that they had experienced a significant reduction in the number of leases during this COVID-19 period. In some instances, this has even encouraged landlords to reduce rental rates by as much as 20%. However, these significantly reduced rental rates are likely to be relatively short-term. May Hnin Phyu, Project Manager at SPACE@Yankin Condo, told SPS that “although we’ve seen a reduced number of leasing enquiries, we’ve still continued to sign tenants throughout this period without significantly reducing rental rates. We’ve also sold a few units over the past couple of weeks and so we feel SPACE@Yankin is in a strong position going forward.”

Furthermore, as the COVID-19 situation in Myanmar has improved many foreigners are looking to return to Myanmar. This means that once international flight restrictions are lifted developers and landlords expect that demand will increase. Furthermore, Stephen Purvis explained that “In June [Yoma Land] have seen a gradual re-engagement with sales returning at Star City for both CityLoft and a new landed property product, at the high end landed property in Pun Hlaing, as well as at The Peninsula Residences, especially after adopting a virtual sales tour based strategy, which has generated many new leads.” Clearly this demonstrates that within Yangon there is a growing and renewed confidence in investing in a variety of types of residential real estate.

The Myanmar government’s COVID-19 Economic Relief Plan, included a series of measures that would support businesses and individuals to mitigate some of the economic risks from COVID-19. Relating to residential real estate, perhaps the most significant measures have been The Central Bank of Myanmar’s (CBM) decision to substantially reduce interest rates. In total CBM made three separate cuts to interest rates which brought the total rate cuts to 3%. Stephen Purvis told SPS that “the reduction of interest rates has positively impacted enquiries for CityLoft.” Purvis continued, “clearly this sector of the market is very sensitive to monthly payments so the interest reduction increases the customer base as more people can afford property and pre-qualified buyers can upscale to larger units.” However, Purvis also noted that sales at Yoma Land’s prestigious The Peninsula Residences, a luxury residential component of the Yoma Central mixed-use development, had been stable and that for those who are “more financially sophisticated… mortgage rate change is a secondary factor.” Therein, it is unlikely that reductions in interest rates will encourage increased demand for high end residential real estate, whereas rate cuts have proven to bolster interest in the mid-range market.

With that being said, The Myanmar Times recently reported that in a meeting between the State Counsellor and the construction sector, U Shein Wi, president of the Myanmar Construction Entrepreneurs Association asserted that “in Yangon Region there are about 15,000 condominium units now under construction, 40% of which are available for purchase to foreigners. If these 6000 units are fully sold, best pans for gas stoves it would be an additional US$ 1.1 billion in the economy.” U Shein Win further suggested that the Myanmar government should make it easier for foreign buyers by allowing them to pay a deposit of up to 30% of the value of the desired unit via foreign bank branches operating locally and arrange for mortgage options at lower interest rates. If these suggestions were to materialise, it could greatly increase demand from foreign buyers for residential real estate within Myanmar.

SPS anticipates that there is likely going to be increased activity within the residential sector in the coming months, as we have received a notable surge in residential valuation inquiries in recent weeks. The current period is a particularly prudent time to get properties valued as it allows individuals to make informed decisions about their assets amidst uncertainty. If you would like to find out more about residential real estate in Myanmar or how you can go about having your assets valued, contact SPS today.

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