Nov 26, 2011

Myanmar paused at the lights for investors

Myanmar is gradually opening up and the new pro-development economic policies being implemented will set the real estate sector on a dramatic new course for growth, says the first Yangon Property Market Report from Colliers International Thailand.

“You could say that the situation for investors is a bit like amber at a traffic light with everybody ready to go after the sanctions are lifted and a new investment law passed”, said Patima Jeerapaet, managing director of Colliers.

Mr Patima referred to land prices in prime locations such as along Pyay Road and downtown attaining the same levels as that of the centre of Bangkok in anticipation of an opening up in the near term.

However he sounded a note of caution: “We have been down this route before in the country; only to have the door closed, so there is some caution within the optimism.”

Myanmar has slipped to the bottom of the ASEAN economic league table, below Laos and Cambodia, which Mr Patima believed would give added impetus to reform the economy.

“Myanmar was one of the richest countries in Asia in the 1950s and there is a strong appetite within the country to realise its potential once again,” he added.

Tony Picon, associate director of research at Colliers, said the history of the country during the past 20 years has significantly altered the way investors should think about real estate in Yangon, the nation’s commercial capital.

“One example is that the most sought after and expensive units of an apartment or condominium block are on the ground floor, which is totally opposite from other countries and for good reason,” he said.

In fact, the definition of what differentiates an apartment from a condominium is also unusual. “In Myanmar, a condominium has a lift whereas an apartment doesn’t because there is no law defining actual strata title,” Mr Picon added.

The office market is beginning to reach saturation point with total supply limited to about 50,000 square metres (538,000 square feet), less than many individual office buildings in Bangkok. Surachet Kongcheep, senior manger of research at Colliers, said occupancy is at 100 percent in all but one of the buildings. “There was no new supply for the whole of the last decade and one new office building opened in 2010,” said Mr Kongcheep. “Many businesses and NGOs occupy space in residential units and some have taken up space in hotels and serviced apartments,” he added.

Both the hotel and serviced apartment market are seeing robust demand mostly on the back of a surge in growth from tourists following the release of Daw Aung San Suu Kyi and renewed interest among Myanmar investors.

Mr Picon said that some hotels have to turn people away due to increased demand and limited supply. “It wasn’t long ago when they remained largely empty and converting some rooms to office space was the only means of surviving such difficult times,” he said.

Mr Picon added that many in the tourism industry are concerned that such limited supply will create bottlenecks in the future for the whole of Myanmar as Yangon is the main entry point and tourists will wish stay for a few days and visit the many sights in the city before travelling elsewhere.

The next year will be a critical one for the country as it is expected to pass an investment law that could lead to a pro-development growth model based on export-led manufacturing.

“That is the only way that sustainable growth for the country can occur as has happened in Vietnam, Cambodia and Laos in the past 10 years or so,” said Mr Picon.

Gestures of reconciliation between the government and opposition could become more tangible and eventually lead to an ending of sanctions imposed by Western nations. New finance regulations are planned that might bring the official rate of the national currency in line with the market rate and allow smoother operations in what is essentially a cash-based economy.

Mr Picon sees the currency, investment law and sanctions as the three pillars keeping the traffic light on amber. “Once these three are dealt with the green light will appear but as with any emerging economy the road will be difficult with many obstacles. I think the country will soar and the Yangon Property Report for 2021 will be a very different one from 2011, we hope.”

Source: Myanmar Times

 
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