Friday, September 22, 2017

Many left stranded in buying rush

It is no secret that speculators have pushed Yangon’s property prices sky-high. Media reports are full of mentions of costs for houses or industrial land or commercial office space now rivalling first-class cities like Los Angeles and Singapore, even though Yangon is the largest city in a UN-recognised Least Developed Country.

Yet the wave of speculation has made it tough for developers to secure land to build on. Insiders say many of the rushes into certain areas doesn’t come from well-thought-through analysis, but follows media reports on high-profile future developments. When these mega projects are slow to materialise, the speculators are often stuck, unable to sell their expensive land.

Ko Htun Htun, owner of Phoenix real estate agents, said that speculators often purchase land near well-publicised projects, hoping their success will lead to higher prices in the area.

“When the projects are not actually built it’s difficult to sell these lots. Then speculators get hit,” he said.

He pointed to Thanlyin and Dala townships and southern Bago Region as home to a number of high-profile projects that are still in the early stages, yet the surrounding property market has drawn considerable interest from speculators.

Thanlyin township is home to Thilawa Special Economic Zone (SEZ), a joint venture between Japan and Myanmar’s governments and businesses. Land prices in the township have shot up since work started to between K200 million (US$200,000) and K500 million an acre, varying depending on location. Yet the jury is still out on how much of a spin-off effect the SEZ will have on the surrounding area, meaning investors are taking a risk by buying into the area.

“Speculation requires a lot of money,” said Ko Htun Htun.

“It’s difficult to sell the land after you buy it. There aren’t a lot of buyers at the moment because there is so much land on industrial zones in other townships, with prices between K100 million and K200 million.”

And while construction has begun on Thilawa SEZ, there are other instances where projects have yet to see the light of day.

Dala township likewise saw a rush of speculation when officials claimed to have Korean backing to build a bridge across the river from Yangon city last year.

With no signs yet of shovels in the ground, the Dala bubble appears to have largely abated, but land costs are still hovering at around K100 million an acre and some investors are stuck with expensive property, according to local agents.

Prices in Bago Region climbed when the planned Hanthawaddy airport received plenty of media coverage last year. The airport was intended to open in 2016, but that date seems questionable as government officials have had to re-open its tender after negotiations with the preferred bidders from South Korea fell apart earlier this year.

As the Hanthawaddy airport gets bogged down, investors who bought in during the initial rush are having trouble finding buyers.

Myanmar Real Estate Service Association central executive member U Maung Aye said people shouldn’t speculate on land just because they have received information of a possible industrial development or infrastructure project.

“We should discourage people who just engage in land speculation,” he said. “The land is for people to live. When people speculate, the working class people have trouble finding land to live on.”

Galaxy real estate owner Daw Mya Mya Sein said that while local investors are often keen to speculate, foreigners also find ways to get involved – despite prohibitions on their activites.