The 1st Wave – Covid-19 enters Myanmar
Since the first cases of Covid-19 was announced on 23rd March, the local economy, including the real estate industry, went into a rapid downward trend, especially due to the closure of borders, airports, public transport and blocked imports of building materials necessary for Developer’s construction sites.
By April, all major cities including Yangon (the largest city) were completely locked down, which forced almost every businesses to transition to work from home, and the majority of SMES, (especially real estate agents) either closed shop, downsized their headcount and stopped all subscription payments in readiness for a severe drop in revenue to their businesses.
In Q2 (April – June), the entire real estate market crashed. Small real estate agencies with little or no revenue, bunkered down for a forced recession. Myanmar has thousands of individual brokers (non-paying advertisers) and only 25 small real estate agencies that advertise around 50% of the properties on real estate websites. Ad revenues from this sector was already limited; with Covid – it dropped to near zero.
This combined with the notorious monsoon season arriving (ie. known for being the worst time for property sales in Myanmar), 97% of all real estate Developers also followed suit by completely stopping all marketing spend to ride out what has become a very deep recession in real estate, and property transactions turned off like a tap.
The 2nd Wave – “A horse with wings” arrives
By 12th Sept, the ministry of health reported a record 351 cases in a single day, the 2nd Wave of Covid arrived and so did 200 new patients daily in hospitals. “It is like putting wings to a horse. A horse is originally strong and fast. With wings, it just becomes faster” said U Than Naing Soe, spokesman for the health and sports ministry. Myanmar had now overtaken Thailand with a greater number of Covid cases and now has the 5th most Covid cases in ASEAN.
With the 2nd wave, the whole country is now under stay at home orders and the entire city of Yangon is in complete lockdown. Without doubt Q2 – Q4 (April – Dec) 2020 is going to be the hardest period ever faced by the real estate industry in Myanmar. The effect to players in the real estate market is a massive reduction in property transactions, with revenue numbers down to ~ 10-20% of normal sales – which for real estate portals, including ours, and other property transaction businesses eliminate any chance of profitability.
Home buyer and renters, who make up the majority of property transactions, want to see the property they are purchasing but are unable to due to lockdowns, therefore transaction sales have been nearly non-existent since April.
With revenues declining and profitability out the door in what is now a severely wounded real estate market – reaching investor projections is unlikely. To reach even 25-30% of last FY revenue numbers would be an act of superhuman powers!
The 2nd wave is much more impactful then the first and it will negatively affect full year 2020 forecasts for every business working with the real estate industry. Most SMEs under 100 staff serving the real estate market, will be forced to further reduce costs, completely shut down, inject external funds or personal loans to stay afloat.
Myanmar’s Shape-Shifting Tech Sector
Throughout the crisis, Myanmar continues to have a thriving Tech sector, with many reputable startups who have successfully raised millions of USD in funding and have achieved rapid traction, (including ShweProperty having raised US$3 million in late 2019). As the last frontier in SE-Asia, the tech sector opportunities are enormous for experienced first movers with strong management teams.
However, other market news has not been so kind to the industry, especially with some tech startups closing down or forced into liquidation. This includes the:
• withdrawal of Rocket internet’s online property and classifieds in March 2018. After 5 years of educating the market, then withdrawing from the country after the entry of more experienced and well-funded players.
• de-listing of the public company MySQUAR (social app) from the UK-AIM in December 2018 (reported to involve related party transactions and significant cash payments to a shareholder without signoff or disclosure).
• The shutdown of Red Dot Network (payment solutions) in February 2019 after being sold to a new owner, then reported to have left the country, leaving lots of agent’s deposits unpaid.
Myanmar’s 2020 GDP growth according to the ADB is forecast to be 1.8% (one of the highest in SE-Asia), however the World bank ease of Doing Busines difficulty ranking is 165 / 190, and the corruption index is 130 / 180, making it a not so attractive destination for many investors.
The country remains mainly a cash society, which can be particularly difficult (or useful) for in-experienced tech startups who are trying to raise funds at high valuations – ie. cash transactions can make it easier to falsify financial reporting by recycling cash or transactions through a company, then declaring it back as revenue or profit.
Investors can have significant opportunities in Myanmar, but if they are to invest without a seasoned Lead Investor on the ground, turn a blind eye and/or forego an intensive due diligence process (not just a statutory audit) to ensure 100% financial, legal, employment and taxation compliance, then they risk losing their money and reputation when everything eventually comes out.
Fortunately, Myanmar has clear laws on compliance and although local statutory reporting can be easily approved in the short-term, any discrepancies or non-compliance that are re-discovered in the future will be subject to hefty fines, possible imprisonment, or liabilities passed to the directors or shareholders.
The Future Post Covid – Preparation for Success
Although it looks like the Myanmar Real Estate market will remain stagnant until the end of 2020, ShweProperty’s experienced management team remains very confident and positive about the future.
We have been through three recessions previously and believe that our compassion, decisiveness, long term strategic thinking and diligent execution will lead the business through the crisis and emerge 100 X stronger.
Our business remains financially stable and our people motivated. We have retained all our top talent and management team who have over 100 years of combined industry experience. We will punch out of Covid with more products and services, and more efficient and effective than ever before.
The business continues to be run with strong governance and fair employment contracts to ensure compliance with the law at all times. Although some companies choose to use unlawful employment contracts that oppress their employees, we believe in employment agreements to support our staff and are approved by the labour department.
Having a professional and proven local and international management team gives less chance of a single point of risk or failure. We have a policy to not hire direct family members or close friends, especially in sales or finance management roles which can be easily exposed to fraud.
ShweProperty also believes in strong partnerships. This year the business forged an exclusive partnership with PropertyGuru for the “Myanmar Property Awards”. We were selected because of our #1 position in the real estate market in Myanmar. This allows the business to work closely with Developers to deliver multiple online channels to help sell and market their projects both locally and internationally.
Additionally, ShweProperty is still hiring, particularly to further strengthen the management team, and for top sales and marketing professionals to help rapidly grow the business post Covid. We see strong long term potential in the market and through our streamlined property sales transaction model, we will continue to lead, dominate and support the real estate market in Myanmar.
ShweProperty is Myanmar’s #1 Property Portal founded in 2011, with the highest quality traffic, highest # of listings and Developer inventory and best in country tech eco-system (including an integrated website, home loan and banking dashboards, CRMs and Sales inventory modules).
The company recently secured USD 3 Million Series B in late 2019 with Emerging Markets Investment Advisors (EMIA) leading the round, followed by Simon Baker (ex-chairman iProperty and Mitula Group), 500 StartUps; the family office of Dinh Thi Hoa, (Chairwoman Galaxy Media & Entertainment Vietnam) and existing investors Vostok New Ventures (Nasdaq Stockholm) and a UK Based fund also participating in the round.
Other shareholders include Justin Sway (ex. FastTrack Software in Australia, NZ, EU), Jonah Levey (ex. VietnamWorks), Gilles Blanchard (ex. Seloger.com and Bod member EMPG group and Zameen in Pakistan).
Shwe Property is led on the ground by experienced CEO and Myanmar born – Justin Sway, and Founder and Director – Kaung Thu Win.
The management team consists of long term experienced professionals : Dolly Lwin (VP of Sales, ex. Naing Group Construction), Andrew See (Director of Project Sales, ex. PropNex Singapore), Zan Zan (IT manager, ex. Property Singapore), May Thu Win (Financial Controller, ex. Tion Woon Corp : SGX ) and Grace Ei Thwe Aung (CX Operations director, ex-GM iMyanmarhouse, ex. Flymya).
The business is also recruiting an experienced Managing Director, which they plan to announce soon.