RANGOON — Real estate prices in Rangoon have fallen as much as 25 percent in recent months, a sign that a larger market correction may be on the horizon, reversing a three-year-long trend of soaring prices.
Many new apartment buildings have been built in the last two decades and vacancy rates remain high, several real estate agents told The Irrawaddy. This has recently led to apartment owners and real estate developers selling below market price.
“Particularly in outlying townships, like Thingangyun, Hlaing, Insein, South and North Okkalapa, the prices of some older apartments have fallen up to 10 percent,” said Zaw Zaw, a senior manager at Unity Real Estate Agency. “For example, a low-story apartment in Sanchaung [Township] that would have previously gone for 60 million kyats [US$50,000] is now selling for 50 million kyats.”
While prime real estate in downtown Rangoon has not experienced a similarly precipitous fall, prices have still dropped 5 to 10 percent, according to the real estate agents.
“In Thingangyun Township [northeastern Rangoon], a brand new, 800-square-foot, sixth-floor apartment that has had no previous tenants, has dropped from 25 million kyats to 22 million kyats,” Zaw Zaw said. “So you can see the size of the drop depends on location.”
Demand for high-end property has cooled off in recent years, although prices have remained stubbornly high, with some apartments costing as much as $1,500 per square foot. Many Burmese are uncertain about the country’s future during this time of political transition, and therefore buyers and sellers have tended to take a wait-and-see attitude. This has suppressed transaction volumes more than would be expected in a more mature market.
“Developers working in the suburbs are in need of capital to keep their construction projects going, and they have cut their prices up to 25 percent to address these cash flow issues,” said Than Oo, managing director of Mandine Real Estate Agency.
In the past, developers would normally raise capital in advance by selling apartments before the construction even began. But this practice is changing, and developers now try to sell as many apartments as quickly as possible once a building is completed. This has induced them to lower their prices in order to boost sales.
“This is a sign that demand is remaining low while supply is increasing, and people are waiting to see what happens with the political transition,” Mandine’s Than Oo said.
And now real estate is no longer the only show in town.
“Much investment went to the stock market since it launched earlier this year, so that’s impacting the real estate market now,” Than Oo said.
Falling land prices due to shifting government policies will also affect apartment prices in Rangoon, according to The Su Mon, manager of Vantage Tower, which is run by developer Myint & Associates.
“If the government policies on land and apartments improve, it will be a lot easier for the middle class to realize their dream of owning their own apartments,” The Su Mon said.