Real Estate is one of the sectors attracting the most interest from investors looking for opportunities in Myanmar. On a recent fact-finding mission, one investor told us of his surprise at how expensive real estate is in Yangon. There are a few explanations for this situation.
The banking system has not been functioning well for many years, and ordinary citizens are still reluctant to put their money into banks. There is really no stock exchange in Myanmar, so in essence people have very few options for investment. To try to get returns on their capital, many people put it into land and houses. This phenomenon works not only on the individual level but for companies as well. Downtown Yangon is expensive because businesses making large amounts of money need a place to put that money. Real estate prices are driven up as a result.
Another thing to consider about Myanmar is that unlike other countries where people buy real estate with debt, houses and land in Myanmar are paid for with cash. Because the land was bought with cash, there is no pressure from banks to sell the land, and we’ve seen remarkable patience from sellers in the real estate market. They simply refuse to sell their land at a loss and they wait patiently for the market to rebound. Although many believe that these factors have created a real estate bubble in Myanmar, the fact remains that prices simply don’t go down.
Another aspect of Myanmar real estate that foreign investors should understand is the prevalence of agents in the country. Because of the lack of large corporations who employ workers, there are relatively few corporate jobs available in Myanmar, which means that a sizable percentage of people have become ‘real estate agents’ (part time or full time) connecting buyers with sellers to earn commissions. These agents have a direct interest in keeping prices relatively high because their commissions are based on a percentage (usually about 2%) of the sale price.
Yet another reason that real estate is expensive is because of its perceived value within Myanmar culture. People consider real estate to be safe – something that they can pass on to future generations. People also understand that real estate is scarce, especially in downtown Yangon. Yangon is currently THE port in Myanmar, and the price of its real estate reflects that status.
The real estate sector is attractive to investors who see the plethora of old colonial buildings in Yangon and envision crafting a boutique hotel or attraction. The architecture of the city is indeed unique and there is room for more tourist attractions in Myanmar. However, we must caution that investing in these colonial buildings is for investors with deep pockets only. Most of these buildings were auctioned off by the government, and were snapped up by wealthy Myanmar businesses. These businesses are considering turning the buildings into hotels or museums, but many are looking for foreign firms only to help manage the attractions – they’re not looking for investment partners because they already own the building. Wealthy Myanmar businessmen understand the potential of these buildings very clearly – don’t expect any bargains.
Investors not looking at downtown Yangon, but looking for agricultural land or land outside of the main city centers, will find much more reasonable prices. In fact we’ve seen some very cheap agricultural land that has the potential to be very profitable considering how fertile soil is in Myanmar.
Foreigners cannot own land, condos, apartments, or any type of property in Myanmar. However, foreigners are able to lease land for up to 60 years with an MIC permit. There are many such foreign owned properties – especially hotels – in Yangon. Some examples include the Chatrium Hotel owned by a Thai company, and Park Royal Hotel owned by Singaporeans. Of course when we say that a property is foreign owned, it means that these hotels have been granted the right to use the land according to a Build, Operate, Transfer (BOT) agreement.
Many investors are hopeful that the new Foreign Investment Law will include provisions that allow foreigners to purchase condos (similar to the Condominium Act in Thailand) but this remains to be seen.
Check out the Myanmar Investment Guide to learn more about Myanmar property laws.