In recent months they’ve become a fixture of my regular teashop on Bogyoke Aung San Road in downtown Yangon. Wielding cell phones, contracts and large folding maps of the city, the property brokers are aggressive, talking loudly into their handsets as other customers chat quietly over cups of tea.
For many, the brokers are the ugly side of the business sector, claiming large commissions for linking up buyers and sellers.
“The market is hot, they need somewhere to work, so they set up here,” sighs the 34-year-old teashop owner, as he clears cups from a table beneath a graceful but discolored colonial-era apartment building dating back to the 1920s. “But they scare off my other customers with their behavior.”
The swagger of the brokers isn’t unfounded, however. Yangon is in the middle of what appears to be a property boom, fuelled by the wealth of those who grew rich under the former military regime, a sense of anticipation that formerly isolated Burma is set to open up to Foreign – and in particular Western – investment and business, and a good dose of speculation. But like the country’s political future, it’s not clear what’s in store for the property market: has it overheated, fuelled by optimism, or is it at the start of a prolonged period of growth?
Land in the city’s downtown area, a patchwork grid of decaying buildings, eight-storey walk-up apartments and new condominiums with a population density approaching 50,000 per square kilometer, has always been highly sought after. Prices in some areas are as much as K2 million ($2,500) a square foot – more expensive than similar locations in Bangkok – while space in the few available office buildings is as high as $200 a month for a square foot.
However, in the final months of 2011 prices also shot up – in some cases by four times – in outer suburbs of the city that were previously undesirable because of poor public transport and infrastructure.
“Land prices have tripled or even quadrupled over the past six months,” says Tin Moe, a freelance business journalist who has lived in East Dagon for the past eight years.
“Sometimes the buyers are businessmen from Yangon, but mostly they are [naturalized] Chinese and Shan-Chinese from Mandalay,” he says. “The locals are selling up and moving somewhere further out of the city, where prices are still quite low.”
Similar increases have occurred in other Burma towns, particularly those close to major infrastructure projects, such as Dawei, Kyaukpyu and Sittwe. But it is in Yangon, the country’s commercial capital, where the effect has been most pronounced.
In East Dagon, 2400-square-foot plots along a nearby arterial road that’s being upgraded have sold for as much as K130 million (about $162,000) in recent weeks. When Tin Moe moved to East Dagon eight years ago it was freshly reclaimed paddy fields with an irregular electricity supply and only “a handful of residents…it was very quiet.”
While it remains relatively undeveloped, roads are slowly being paved and wooden houses replaced with two-storey concrete dwellings. A nearby economic zone is expected to provide more jobs for residents if and when manufacturing takes off.
“The buyers are speculating…they expect this area will become more developed in the future. Some are even buying farmland off the map based on its location – you can see them out in the paddy fields past North Dagon University, trying to work out exactly what they’ve bought,” Tin Moe says. “We never expected it would be like this when we moved here.”
One particularly hot area is Thanlyin, located across the Bago River from Yangon. The military government proposed establishing a special economic zone in the area more than a decade ago but it never materialized, disappointing prospective investors. However, the project has been revived by Thein Sein’s administration, which is keen to attract investment and create jobs as part of its poverty alleviation drive.
In Thanlyin’s nascent industrial zone per-acre prices rose from K85 million ($106,000) in late October to K250 million ($312,000) just one month later, according to real estate agents in Yangon.
“They are Myanmar (Burma) buyers, and they are trying to buy up all the land there,” says one agent based on Anawrahta Road in downtown Yangon, who asked not to be named. “They expect foreign companies will come in and rent the land from them at a high price.”
There’s another factor behind the bet on property, says Sean Turnell, an associate professor of economics at Australia’s Macquarie University.
Cut off from global finance and investment markets, wealthy Burmese have “nowhere else to put their money safely,” says Turnell, who has studied the Burmese economy for years. The strong local currency, which appreciated about 30 percent against the U.S. dollar in 2011, has made many export items unprofitable, discouraging investment in export-oriented businesses. Property provides the possibility of substantial returns and, while a fixed asset, can be bought and sold relatively quickly.
“Myanmar people have what I call ‘land-crazy disease.’ These aren’t normal economic conditions. I studied economics, and what is happening doesn’t conform to any rational economic theory I know,” the real estate agent says. “And in many cases, it’s simply gambling: buy in the morning for K20 million ($25,000), sell in the afternoon for K2.2 million ($27,500).”
In the long-term, however, this “gambling” could prove prudent. In its Yangon Property Market Report for the first half of 2011, consulting firm Collier’s Thailand argued that the country was on the “cusp of beginning…the basic real estate story of Southeast Asia,” with growth driven initially by tourism and foreign investment and then “an aspirational, young population.”
“If the country truly embarks on a course for sustainable economic development, then the future for the real estate market will be tremendous,” the report said.
For both the property market and economy generally, much hinges on new land ownership, condominium and foreign investment laws that the government is expected to submit to parliament for approval, possibly early this year.
But Rob Lacey from Asia Plus Securities, a Thailand-based securities brokerage firm, says there is a growing belief in the business world that Burma is set to become the next emerging market in Southeast Asia.
With a sizeable population, cheap labor, European-facing deep-sea ports and road access to Thailand, China and India, he says the ingredients are there for export-led development.
“Myanmar would be perfect place to relocate low-cost production. I’d imagine the Japanese auto industry will be one of the first to set-up shop,” Lacey says. “Assembling, then manufacturing for domestic market and export.”
“I’d be looking at satellite cities and areas outside Yangon itself. I believe it’s the government’s intention to develop several cities simultaneously, not just Yangon alone.”
Several sources said the price rises were also linked to confidence in the government’s reform agenda and the expectation that new legislation will open up the economy to foreign investment, particularly in the manufacturing sector.
“It mostly depends on the political situation,” Tin Moe says. “If the government creates a friendlier economic environment for doing business, there’ll be more investment, more jobs, more development and land prices will keep rising.”
The author is a Burma-based writer. His real name has been withheld at his request.