After decades of isolation from the rest of the world, Myanmar is now open to welcome fresh opportunities from overseas, following new political reforms implemented by the government.
A change in the political climate means a more positive outlook for businesses as well as the country’s property market, according to a recent report by OrangeTee Research & Consultancy.
PROGRESS MADE
Due to the improving political landscape, several western countries have relaxed or suspended economic sanctions previously imposed on Myanmar. As such, various multinational companies (MNCs) are now looking to expand in the once reclusive country. These include Coca Cola, PepsiCo Inc, Universal Robina Corporation, Honda and Pioneer Corporation.
On top of that, major financial institutions are on the lookout for suitable premises in Myanmar, and are poised to enter the market once regulations are removed.
Myanmar is endowed with rich natural resources including minerals, gems, oil and gas reserves, timber, a coastline with abundant aquatic life, and large tracts of agricultural land. Moreover, its low wages make the country ideal for low-cost manufacturing.
In August this year, the Asian Development Bank (ADB) predicted that Myanmar will become a middle-income nation by 2030, enjoying a seven to eight percent GDP (Gross Domestic Product) growth rate over the next decade. At present, the country has a 5.5 percent growth rate, which is pretty impressive. Despite this, its GDP per capita is the lowest in South East Asia.
Nonetheless, more strategists and economists are intensifying their coverage on Myanmar thanks to the changing political climate. This is expected to promote greater awareness in the number of business opportunities in the country that will spur further interest in Myanmar’s property market.
PROPERTY OUTLOOK
OrangeTee expects demand for residential, commercial and retail space in the country to increase dramatically in the coming months as more expatriates enter the market in search of business opportunities, hurrying to secure a slice of the pie.
At present, Myanmar’s property market is not very dynamic, and this is made worse by the lack of new projects over the past decades. Hence, nearly all the top quality hotels, retail malls, offices and serviced apartments are operating at full capacity.
For instance, a one-bedroom serviced apartment is currently priced at around US$2,000 (S$2,457) a month and the rates for high-grade hotel rooms go up to US$250 per room/night (S$307), while offices command an asking price of US$6 psf (S$7.37).
Such rates make property investment in Myanmar extremely desirable, and the fact that the market remains largely unleveraged adds to its appeal. However, foreigners are still not legally allowed to have direct ownership of any property in the main city of Yangon as of 1 September 2012.
Despite this, one alternative is for foreign companies — formed with the permission of the Myanmar Investment Committee — to take up long term leases. Notably, the country does not have a strata title law. Theoretically, this implies that ‘purchasers’ of properties are only buying the right to use the space from the developer. If the building is damaged or destroyed, these ‘purchasers’ would not have rightful part-ownership of the land.
At the same time, the resale market is not very transparent. Reliable information on transactions is hard to find. Hence, investors would find it hard to determine their entry point and formulation of their investment exit strategy.
LACK OF TRANSPARENCY A PROBLEM
Meanwhile, Kok Keong Tan, Director for Research & Consultancy at OrangeTee said: “Myanmar is starting at a low base in terms of cost and prices which leaves a lot of room for growth. The surge in interest is due to the swing in market sentiments towards emerging economies. Add to the fact that Myanmar has an abundance of natural resources.”
But he did also point out that while Myanmar’s property market has a lot of potential, the lack of transparency poses a problem.
“Singapore developers have been actively exploring the market for some time. However, to take part in development projects is not easy due to the lack of transparency in information and development process which takes time to navigate through.”
Nonetheless, once legal reforms are more firmed up, investors from other parts of Asia are likely to pursue investment opportunities in Myanmar.
In the meantime, the government will need to address challenges like poor infrastructure. “Power, water, sewerage, phone lines, and the public transport system all need to be beefed up. Thus, the government needs funding to build up the infrastructure. The natural temptation will be to sell land but it needs to be controlled so that the infrastructure can match up with new developments,” added Tan.
Meanwhile, OrangeTee will be organising an exclusive property showcase for one of Myanmar’s biggest developers, the Shwe Taung Group, to be held at Hilton Hotel in Singapore on 27 to 28 October 2012.
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