A planned expansion in Myanmar’s business capital, Yangon, will nearly double the city’s residential capacity, helping to support its property market.
In June city officials unveiled an MMK8.2trn ($7bn) plan to build seven new urban centres around the city by 2040 in collaboration with the Japan International Cooperation Agency, following on initial proposals in 2013. The new developments, which will divide the former capital into seven sections, are expected to accommodate some 10m people by 2040, up from 5.2m at present.
According to Yangon mayor U Hla Myint, the first area to be targeted for development is the north-east section of the city, with a proposal worth MMK491.1bn ($383.4m). The area is being prioritised due to its low population, good transportation links, and location between the Thilawa special economic zone and Hantharwaddy Airport, both of which are under development.
Construction work on mega-projects in Myanmar, started in the past four years, has been gaining speed in Yangon in particular. Beyond increasing residential space, the urban centres will also provide areas for industrial and commercial activities, and will dovetail into the city’s transport expansion plans. Yangon officials are working to tackle congestion, which is becoming an increasingly pressing issue for the country’s largest city and commercial hub.
In August a tender was opened to local and international companies to provide buses for a new “Bus Rapid Transit Lite” system, managed by a joint venture between the government and several large Myanmar firms, known as Yangon Private Public Partnership Company.
According to Daw Sandar Htun, managing director of the Shwe Taung Development Company, transport infrastructure is key to growth, particularly in the retail sector. “The lack of infrastructure impacts the shopping malls customers decide to use,” she told OBG. “Normally the catchment area is between two and four miles, but in many instances, people opt for another shopping mall due to the route of the bus line.”
Gareth Wong Wei Han, general manager of urban solutions consultancy Surbana International Consultants (Myanmar), echoed this sentiment. “Good transport infrastructure can help to cut down traffic bottlenecks and is critical in helping cities develop faster,” he told OBG. “It can help facilitate the efficient movement of goods, improve the quality of life and also reduce environmental pollutants from traffic jams.”
News of the urban development plan comes as Yangon’s real estate market is slipping from recent highs. As demand for new residential construction projects has grown, prices for some properties – in particular, stand-alone residences at the upper end of the market – have fallen by as much as 30% over the past year, according to real estate agents quoted in local media.
The arrival of a number of new residential complexes on the market and increased workflows coming through the development pipeline may have tipped the balance towards an excess of supply in some segments.
Demand for apartments has also cooled, with sales easing significantly as project costs continue their ascent. Most condominiums in Myanmar are funded through off-plan sales, where developers use the proceeds of pre-construction sales to finance projects. Sales of units to investors as either rental properties or on speculation of a continued rise in prices have also dropped amidst uncertainty ahead of the November elections.
But despite recent trends, Mark Petrovic, managing director of architecture and engineering consultancy Archetype Group, believes the market will likely rebound after the election.
“The property market has slowed down in the last eight months, partly due to the fact that hype has simmered and foreign arrivals have decreased; but, after the election, demand and foreign interest will pick up again, leading to a price hike,” Petrovic told OBG.
The government has also moved to allay concerns and boost confidence in the construction and real estate sectors, pledging to compensate investors and developers for losses incurred after the cancellation of five developments near the Shwedagon Pagoda, where construction was blocked on concerns the projects would affect the views of the temple or damage its foundations. Despite the cancellations, the successful launch of Yangon’s urban expansion programme may mean concerns over Myanmar’s property development industry are short-lived.
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