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Should investors consider the Myanmar property market?

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The Great Recession may be officially over. But the world's greatest nations are faced with new challenges. Examples include the Eurozone debt crisis, Canada's current economic woes, and The United States’ slow recovery.

In the past, when something like this happened, investors would usually stop buying. Today, however, they have adopted a new strategy. This involves diversifying into markets that can maximize their gains.

This is where the Asian market comes in. With what's happening in the Western world these days, real estate investors divert their attention to Asia.

According to Jones Lang LaSalle, transactions in key Asian markets totaled $90 billion during the first three quarters of 2013. Compared to 2012, there is an increase in transaction volumes by at least 25%.

Emerging trends reports indicate that despite slow activity in some parts of the region, the Asian real estate market will enjoy a steady growth. If you're an investor, one of the markets to watch out for is the Myanmar property market.

Why Myanmar?

It can be recalled that the country was under military rule for five decades. When the dictatorship formally ended in 2011, Myanmar has seen a steady economic growth. This year, the country's economy saw a growth of 6.5%. The Asian Development Bank (ADB) says that Myanmar's economy will grow by 6.8% in 2014.

This economic growth is supported by several factors, which include the following:
- Strong investor optimism because of policy reforms initiated by the government- growth in the country's tourism sector- increase in export volumes.

Aside from that, optimism can also be seen in the country's leasing market. Following economic growth, the market is slowly showing signs of stabilizing according to experts.
In a property report released recently, the Myanmar property market enjoyed the following.

- Asking prices for residential properties increased by up to 46%.

- The rising capital inflow from foreign investors is fueling a commercial property boom in the country.

- The average rental rate of $80 per square meter in Yangon is three times more than Bangkok and Hanoi, and even greater than Singapore's $70 per square meter.

This increase in rental prices is driven by Myanmar's underwhelming supply. Data released by Colliers International indicate that compared with the supply of neighboring markets such as Vietnam, the country has a lot to catch up on. For instance, Yangon's office building supply has stayed well below 200,000 square meters since 1996. Ho Chi Minh, on the other hand, has grown rapidly. In 2011, the city's supply was close to 1,400,000 square meters.

As financing becomes more available, it is expected that developers will rush to complete different projects to fill pent-up demands. Following consumer preference, developers would most likely to focus on the following sectors: office apartments, hotels, and villas. These demands are supported by the growing demand as demonstrated by the following.

- Harrison Institute says that for the first time in many years, Myanmar received more than 1 million tourists in 2012. This is expected to increase by 200% by 2015, so the demand for hotels has never been higher.

- At present, companies prefer to rent out villas and houses and turn them into workplaces. This is fueling the need for premium office spaces in three key locations: downtown area, inner city area, and outer city area.

So, should investors consider the Myanmar property market? With a steady economic growth, a high demand for rentals and residential homes, and an underwhelming supply of properties, Myanmar is definitely the market to watch for.


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