Exorbitant property prices, highlighted as one of the biggest business barriers in Myanmar, are expected to be brought down to a level competitive with that of neighbouring countries by 2018.
Moe Thida, deputy director of the Construction Ministry’s Urban and Housing Development Department, told the Myanmar Global Investment Forum last week that some measures have been launched and more will be coming to bring down the prices.
As more office space is in focus, more land would be allocated to private construction projects.
“If the supply of commercial space increases, prices will fall. We are now observing how much land to be allocated for office and commercial development and how much for residential development,” she said.
According to Colliers International Myanmar, total office stock in Yangon – the biggest commercial city – was 107,000 square metres at the end of last year. It predicts annual average new supply of 70,000 sq m from 2015 to 2018. Citywide office rents rose 6 per cent from 2013 to US$69.17 (Bt2,500) per square metre per month, but buildings in the inner city zones enjoyed a 23-per-cent increase.
At that rate, it is over six fold above S$11.93 (Bt300) per square foot (1.1 sq m) – the average monthly gross rent for premium office space in the Raffles Place/New Downtown micro-market in Singapore.
Moe Thida attributed the high land prices to high demand as well as speculation. While demand is out of control, the government is reining in speculation through tax measures.
“The government needs to monitor land use purposes. We are trying to satisfy demand. We are trying to respond to this appropriately, but still we cannot monitor the process efficiently,” she said.
Another focus is also placed on low-cost residential construction. Myanmar plans to provide 30,000 such units in three years.
Local and foreign firms are invited to join the construction. A new mortgage scheme has also been launched to increase affordability while the housing development law should be enacted soon.
Moe Thida noted that 58 per cent of households in Myanmar earn less than 300,000 kyat (Bt8,300) a month.
Stressing the need for more private sector participation, she sees the need for a level playing field for foreign players.
At the international event, Cyrus Pun, Yoma Strategic’s head of real estate and executive director, stressed that land availability is key.
“Different ministries control land plots in urban areas. An appropriate land allocation policy will be needed. And the government also needs to find out why construction costs are very expensive,” he said.
Construction in Myanmar is much more expensive than in China or Thailand, as nearly all the materials have to be imported. He supported the establishment of more construction-material plants in the country, as well as more private players.
For a successful low-cost housing scheme, the government must ensure that construction materials and equipment could be sourced at a very cheap price. A transparent process is also necessary in awarding construction contracts, along with a transparent profit-sharing model, he said.
Lorenzo Nogales Tovey, co-founder and partner of Myanmar-based private-equity investment firm Golden Rock Capital, said it is a challenge to ensure a win-win solution when it comes to the affordable housing market. The government needs to be proactive with planning and make sure the units are really affordable for low-income earners.