The Irrawaddy

Will YSX Deal a Blow to Burma’s Real Estate Market?

People wait outside the Yangon Stock Exchange in Rangon on March 25, 2016. (Photo: Soe Zeya Tun / Reuters)

RANGOON — Burma’s newly launched Yangon Stock Exchange (YSX) has left observers wondering what this could mean for the country’s volatile real estate market.

Rangoon, Burma’s commercial capital, has for many years boasted the country’s highest prices for property. Yet some experts believe that the emergence of the YSX, which kicked off trading on March 25 after months of internal dry-run testing, might poach investors who had previously invested solely in the real estate market.

“It is quite encouraging that more than 110,000 shares were sold on the opening day of the stock exchange. At least 3.5 billion kyats [US$2.9 million] flowed into the stock exchange in a single day,” Burma’s then deputy finance minister, Maung Maung Thein, told the state-run Myanma Ahlin daily earlier this week. “[Given that] billions of kyats flowed into the stock exchange on the first day, [it’s possible that] the property market may decline later.”

“We have created the stock exchange as a new place for investment so that [investors] no longer need to invest in a single sector.”

But not all experts believe that there will be such dramatic change, at least not yet.

Than Oo, director of the Mandine Real Estate Agency, said the stock market would not immediately impact the real estate market, though it could affect property prices at a later date.

“It’s still hard to tell what will happen to the real estate market—whether it will ‘wipe out’ or whether prices will increase—because the stock market is still new. I will say, however, that some land and apartment prices may start falling, just not quickly,” Than Oo said.

“For right now, we’re watching to see how the new government crafts economic policy, including this property business. There should be more coordination between respective government ministries, taking lessons from the previous government’s errors.”

Demand for high-end property in Rangoon has declined in recent years, though the prices have remained relatively high, with the highest prices reaching some $1,500 per square foot for land near main roads, downtown townships and commercial hubs. A reluctance to buy and sell properties is often attributed to the wait-and-see attitude many landowners have toward Burma’s political climate.

Moe Moe Aung, secretary of the Myanmar Real Estate Association, said the real estate market was not likely to be affected by the YSX in the near term because people are still unfamiliar with shares trading.

“People think that the real estate market is the only good way to invest money,” she said. “Investors believe that if they invest money in land, they can make more money. That’s why the price of land in prime locations won’t fall very much but why prices in smaller townships and for apartments and condos could fall later.”

Burma’s financial intelligence unit has been investigating the real estate industry since 2014, on suspicion that unchecked money laundering is rampant within country’s property market and financial institutions, spurring the former’s climb in recent years.

Decades of economic sanctions and mismanagement have resulted in a relatively primitive investment climate in Burma, with property being one of the few assets trusted to hold value and few financial instruments on offer to the average investor.