25 Nov Luxury cities & ghost towns

Written by Clare Hammond Published in Property Read 4696 times
Photo: Hong Sar/Mizzima Photo: Hong Sar/Mizzima

The supply of high-end apartments in Yangon will almost quadruple by 2017, albeit from a low base, with more than 10,000 new apartments in luxury condominium towers going on the market. The supply rush will start slowly with a total of about 1,100 new condominium units being completed in the second half of this year and about 1,200 units due for completion in 2015.

There will be a sharp rise in 2016 to more than 5,000 units, with about the same number the following year. In terms of distribution, 37 percent of condominium units are downtown, with only 16 percent uptown, but this is set to shift as the supply pipeline begins to be realised.

Midtown areas are set to see a big increase in high-end apartments, with the completion of mixed-use projects such as Golden City and Dagon City 1, as well as larger residential towers, including Diamond Valley Condominium, Crystal Residences and Gems Garden Condominium.

I also expect more large-scale, self-contained residential projects on the outskirts of Yangon, particularly as the city expands outwards from its historical centre.

The launch prices of off-plan condominium sales have risen quickly during the past five years and are averaging between US$250 and $300 a square foot. But in my view, prices at the higher-end are likely to stabilise due to the large numbers of units being launched and heightened competition among developers.

Nevertheless, buyer demand will remain healthy due to a combination of factors, including a lack of investment options for domestic capital and limitations on transferring money offshore.

One of the biggest challenges facing developers is not whether they can sell the units, but rather selling to buyers who will live in their new properties. The pool of buyers in Yangon is clearly deep-pocketed, but it is also small and many are buying units in multiple projects on a speculative basis, rather than with the intention of occupying the apartments or even letting them out.

The market won’t be impacted in the short term – many of these developments are almost sold out before the site has even been cleared. The issue is that developers don’t want to end up with ghost towns, particularly for the bigger projects that are being built in phases. If the first phase is sold out but nobody lives there, this is going to have a negative impact on demand for the second phase. Many of the developers are trying to sell a luxury lifestyle. If their ‘luxury city’ is deserted it will detract from the appeal. As the pool of buyers is so small, this is likely to be more of a problem in Yangon than anywhere else in Southeast Asia.

Clare Hammond is the managing editor of the Frontier Real Estate and Construction Monitor This email address is being protected from spambots. You need JavaScript enabled to view it.

This Article first appeared in the November 20, 2014 edition of Mizzima Business Weekly.

Mizzima Business Weekly is available in print in Yangon through Innwa Bookstore and through online subscription at www.mzineplus.com