Tuesday, September 19, 2017

Affordable home market to expand aided by flexi-payment options

Demand for private affordable housing in Myanmar is expected to rise this year as a slew of units nearing completion are put up for sale, said Mr Kevin Goos, managing director of ShweProperty.com.

Demand for affordable housing units in downtown Yangon is rising. The Myanmar TimesDemand for affordable housing units in downtown Yangon is rising. The Myanmar Times

“For the last 24 months, developers have just been building and not selling. Now, that’s changing as projects are nearing completion,” he said.

To sell units, developers are now providing more attractive payment options such as installment plans and interest-free loans and getting their projects pre-approved for end-buyer financing. “Affordable housing demand has been growing since the local banks began establishing home-loan products. We have seen transactions increase monthly,” Mr Goos said.

U Yan Aung, general manager of Asia Construction, said local developers are pushing hard to sell their units this year by offering buyers the option to pay up via attractive installment plans. SKK Family Construction, for example, is offering buyers up to 36 months of interest-free installment payments.

“In the past, developers were less interested to meet up with banks to arrange for loan installment plans and buyers had to make their own arrangements with the banks. Now, local developers are trying to sell their units with long-term installments and some have tried to link up directly with local banks to offer more flexible and attractive payment options to buyers,” he said.

Better rates

Buying activity will likely increase even more over the longer term as the banking sector matures. Currently, buyers pay a deposit of 30 percent and finance the remaining 70 pc via loans from the banks at a rate of 13 pc. “If buyers can pay a lower deposit and finance the remainder of the loan at a lower interest rate, then most people with reasonable incomes will buy instead of rent,” U Yan Aung said.

At 13 pc, mortgages in Myanmar are now among the most expensive in ASEAN. Mortgage rates in Cambodia, which started out in 2008 at 13 pc, are now down to 8.5pc for qualified home buyers. In Thailand and Vietnam, the average interest rate on affordable housing is as low as 7pc.

But as demand rises and local banks become more competitive, rates in Myanmar will eventually fall too. “Myanmar’s biggest banks have done an amazing job over the last few months in getting their home loan departments set up. As these departments begin to mature, we will see increased competition among the banks, which will lead to more attractive lending rates to home buyers,” U Yan Aung said.

Affordable prices

In fact, Myanmar’s affordable unit prices are actually much cheaper than in other ASEAN countries. Homes are priced from US$17,000 per unit in the country compared to US$37,000 in Cambodia and US$33,000 for very small units in Thailand.

Myanmar is able to offer cheaper homes than its neighbours as affordable units in the country are more efficiently designed with less common living space and only street parking is permitted instead of providing private parking lots. “The classic eight-story apartment building in Myanmar with either one or two units per floor is very competitively priced,” said U Yan Aung.

Demand is picking up fast. “Although the government’s low-cost

housing is cheaper – between US$

15,000 and US$30,000 per unit – and can be paid for via installments, those units are only for government employees and the retired,” Mr Goos of Shwe Property said.

They are also located far away from town and traffic continues to be an issue. “So, most will buy homes near their workplace and most of those homes will be from private developers,” he said.

“Since April 1, 2017, our agents have sold more than 425 homes mostly in affordable housing and condominium developments. During the three-day affordable housing expo earlier this month, we sold K4.7 billion worth of housing from 11 affordable housing projects in the country, said Mr Goos.