Demand for condo market still weak, but apartment sales rise fast
Sales and rental demand for condominium properties in Yangon remain weak even though the Condominium Rules have been released for almost two months now.
The list of rules, which were released in December, two years after the new Condominium Law was approved, include allowing foreigners to own up to 40 percent of the total floor area of a condominium block, regardless of which level, and individuals to own up to 25pc of the units in a block. It is now also possible for commercial space to be used for residential purposes, as long as the entrances are separate.
Meanwhile, developers’ licenses will be extended to 5 years instead of 3, while pre-selling units are now allowed after construction of at least a third of the condominium building’s foundation is completed. In addition, condo units can now be mortgaged, transferred and sub-leased, making them more attractive as investments.
Nevertheless, “the condo market has slacked compared to the market for apartments, which are more favoured by locals,” Kevin Goos, managing director of real estate agency Shwe Property, told The Myanmar Times during an interview. Shwe Property is a leading online real estate portal in Myanmar offering thousands of properties for sale and rent.
Here is an excerpt of that interview, during which Mr Goos shared thoughts on why demand remains weak and when prospects will start improving for developers and construction companies:
Why has market demand been weak even after the Condominium Rules were approved?
It usually takes six months to a year to enforce similar laws after they have been enacted in other countries. I think Myanmar will also require such a period. So far, we haven’t seen any practical application of the rules yet.
The Condominium Law has the potential to draw huge foreign investment flows into the country from June or July this year, depending on how fast and accurate the information released by the government is.
Demand could also be weak because of the way mortgages are structured in Myanmar. Banks here lack mortgage experience so most property buyers borrow money from their friends or relatives. And as the mortgage system is not common, sellers and buyers are wary of payments via instalments. So, the banks should establish and improve the instalment payment system this year.
Where are most of the sales taking place in the property sector?
Currently, sales of condominium units have fallen behind apartments. The latter is more popular with locals, who are more active at real estate expos rather than in the normal market. Last weekend for example, around 57 apartments were sold during a two-day real estate expo sponsored by Shwe Property.
The reason why the apartment market is doing better than the condo market is that buyers and sellers mutually agree on instalment repayments. Meanwhile, banks are now also more generous in giving out mortgage loans. So, many more can afford to buy apartments these days. I hope that banks can establish similar loan arrangements for condominium buyers by June or July.
Most locals also buy apartments to live in, while condos are viewed more as investments.
Where do you see foreign investments flowing?
Foreign buyers are most interested in the condominium projects developed under joint ventures between Myanmar developers and foreign developers. For example, a Singaporean buyer would prefer projects developed by a Singapore-Myanmar JV. Because a firm from their country is involved in the project, buyers tend to have more confidence in the developer, and payments are also more convenient.
In contrast, if foreign buyers were to buy from Myanmar business owners, they would not only have problems getting access to loans, they would also have to shoulder more risk. As far as I know, this is the same in other countries, not just Myanmar.
How is the rental market doing?
The condo rental market is looking strong in Myanmar now as foreigners mostly rent condos to set up offices or to live in. This should continue in the future. In fact, the condo rental market has picked up recently because rental rates have been reduced. Rental now starts from $1,500 per month for a family and from $800 per month for a single tenant.
Condos being rented out for around $800 are now the most popular. There are condos being rented out at $4,000 to $5,000 a month, but only senior executives can afford to stay in these units and so only a few deals were closed. The salary of foreigners who come and work in Myanmar is normally good and they usually also use up to 30pc of their salary for accommodation.
On the local front, demand for mini-condos and apartments at rentals of between K 2.5 lakh and K4 lakh is brisk. Only a few Myanmar people rent condos.
– The interview has been edited for length and clarity.