Yangon heats upFebruary 18, 2013 / By
As the de facto centre for much of Mainland Southeast Asia, our Bangkok office has received an increasing number of enquiries from offices around the world seeking information or analysis on the real estate markets and opportunities in Myanmar over the past twelve months. Ongoing government reforms there have continued to draw a flood of interest given the perceived high potential for growth in a country with a population of 50 million, rich in natural resources and in proximity to many other high growth markets. Should the necessary legal and policy framework be put in place and sustained, the real estate markets in Myanmar, and particularly in Yangon, will need to evolve quite quickly to accommodate new demand generated by rapid expansion of investment, consumption and global trade.
Even in these initial stages of reform, where activity is mostly exploratory, real estate development of all types whether it be office, hotels, retail or residential is in short supply. Relatively isolated for a few decades, new development has only recently emerged. Although the capital was relocated to Nap Pyi Daw in 2006, Yangon is likely to remain as the commercial hub given its history, the fact that most of the large domestic companies are headquartered here, and infrastructure for manufacturing is most ready in proximity. Having said this, many issues pertaining to development will need to be resolved before it can proceed in a large scale.
While passage of the foreign investment law sets the stage for foreign capital to help finance new real estate development, other laws and regulation directly related to real estate development are lacking. Among these is a town plan for Yangon, which when complete, should provide a picture of how the city will evolve over the coming decades. Furthermore, zoning, building codes and restrictions determining what should and can be done in various parts of the city do not exist either. Finally, the lack of alternative investment class means that capital and wealth has been tied up in land across the city driving up prices. The current perception of land value is often well above the real economic value based on the various types of development that should be undertaken. All of these are likely to slow down a rapid spate of new real estate development.
Meanwhile, occupiers, manufacturers and tourists will have to make do with the limited options that are available at office, residential rents and hotel room rates that are well above those in the rest of the region. Given the interest that has already been shown in real estate investment, a supply response should arrive as the political reforms prove credible and the necessary laws and regulations are put into place.