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 serviced apartments as this is a sector that has been largely untapped and increasingly appeals to Myanmar’s young and growing middle class.