Even with prices for rent growing at an exponential rate now for the fifth straight year, realtors are confident that it is only a matter of time until the bubble that has formed in the city’s skewed property market will burst as a slew of new high-end developments in the pipeline are slated to be finished within two years.
“We know that the high rental fees are caused by the lack of equality between rental demand and supply,” said Daw Moh Moh Aung, general secretary of the Myanmar Real Estate Service Association, adding that land prices have generally grown by 50pc since 2012. “Even though there are a lot of condos to rent, tenants are looking to rent spaces that can accommodate both residential and office-space purposes,” she said.
In turn, she said, tenants will be looking to rent on the high-end side of the spectrum with an eye in particular for international standard housing – something that is still scarce in Yangon.
The current rise in rental prices is concentrated in trending neighbourhoods in Yangon such as Kyauktada and Lanmadaw townships, the Sule Pagoda area and Strand Road, as well as Bahan, Kamaryut and Mayangone townships, said U Khin Maung Aye, a senior agent of Shwe Kan Myae real estate agency.
With land and apartment sales prices on the rise, he said that a luxury condominium now sells for K300,000 per square foot, while standard apartments are selling at K200,000 per square foot, more than 50pc higher than 2012 prices.
Daw Myat Thu, of Moe Myint Thaw Dar real estate agency, said that condos on Sule Road, Pansodan Road and along the waterfront are now renting for anywhere between K1.5 million and K2.5 million for 14.4 sq m (1600 sq ft), compared to K1 million to K1.5 million two years ago, she said, adding that tenants of luxury condos on Pyay Road, 7 and 8 miles in Mayangone township and Inya Road in Kamaryut township are paying even more at K4.5 million.
Nevertheless, there are several mid- to high-tier projects currently under construction that will add much needed supply to the market and with any luck, bring down prices, experts said.
Such projects included Shwe Taung Group’s 194-unit Malikha Project in Thingangyun, while Crystal Residences at Junction Square will include a 21-story building filled with condominiums.
“At that time, rental fees will begin to decrease, but if [the new constructions] do not come through to answer the high demand, rental fees will continue to grow,” she said, adding that she estimates demand for rental units to outweigh supply by 50pc.
But with more demand at a higher standard, developers are having to tack on amenities to create the city’s first Grade A units – something Yangon has never seen before – and the result has been higher prices.
“International standard condos must have car parking, shopping malls, fitness centre, resort and spa facilities, full furniture and a lift,” she said, adding that these are the sorts of amenities drawing the attention of the growing number of Myanmar-riche. “Previously in Yangon, a contractor will put in just a lift and call it a condo apartment.”
Modern serviced apartments in today’s market are rented for as little as $4500 per month, she said, while the recently opened Shangri-La Towers at Kandawgyi Lake are asking between $6500 and $15,000 per unit.
According to a December 2013 report by local financial advisory firm New Crossroads Asia (NCA), there are a total of 1600 condominium units in Yangon spread over a total 300,000 square metres. According to the same data, there has been a 414pc increase in land costs in Yangon since 2009.
Historically, developers looking to cater to the strong demand for modern residential and office space in Yangon have been met by resistance in the form of stringent and unclear development laws as well as a lack of transparency in construction and redevelopment tenders, a problem still faced by many investors today.
“The situation is extreme,” Richard Emerson, country manager for international realtor Savill’s, said with regard to current rental prices.
“Rents started increasing dramatically in 2012 and this is obviously a basic supply and demand feature,” he said, adding that prices are disproportional to those of other countries in the region and are bound to equalise.
“But there is considerable supply scheduled for the next two to three years.”
Indeed, ambitious construction projects in Yangon include the $94 million Star City project across the Bago River will bring more than 9000 units, while the HAGL Centre in Bahan township and the Pyidawthar Project will bring another 2800.
“Whether anyone will occupy all of these [apartments] is another matter,” Mr Emerson said.
source: The Myanmar Times