LOWER-TIER PROJECTS MORE ATTRACTIVE
Summary & Recommendations
The share of pre-selling upscale condominiums remains excessive, driving the overall sales performance to continually dwindle over the past years. In a bid to recuperate buyers’ appetite, most projects now come under pressure to keep sales prices modest. This has become even more pronounced with some developers adjusting prices down by between 30% and 40%. Meanwhile, select new projects are now tapping the lower segments with some signs of success, a trend that is likely to continue given their reasonable price points. We encourage developers to further explore on products that are more competitively priced, especially units within the USD 30,000 to USD 15,000 range. This appears to be highly suited for the underserved low and middleincome buyers.
DEMAND
Colliers sees demand for the low and mid-market segments to gain more traction in long term. There remains a widely untapped demand for smaller but competitively priced units in Yangon.
SUPPLY
The supply had reached around 9,300 units as of Q1 2019. By end-2019, Colliers estimates the annual supply to reach a new record high, totaling to 29 projects.
TAKE-UP
The average sales take-up rate declined to 58%. We forecast a further drop in the succeeding quarters given the shifting demand for more affordable products in the market.
PRICE
Selling prices continue to adjust as the competition in the upscale segment remains stiff. This trend is likely to continue as more lower-tier launches arise in the coming years.
ADDITIONAL STOCK RISES WHILE NEW SALES LAUNCHES PLUNGE
Yangon’s total stock of completed condominium developments reached almost 9,300 units as at the end of Q1 2019. The 8% qoq increase was prompted by newly built projects namely Paw San Hmwe Residence Tower A and B (Mya Thet Tin Construction Co., Ltd.), Mawrawady Condominium (Mawrawady Development Group), Golden Rose Condominium (DaDo Construction Co., Ltd.), The Spring Line Residence (Shwe Oak Khai Construction), and Royal Maung Bamar Residence (Nay Ga Bar Myanmar) – all located in the Outer City Area.
While the additional stock becomes substantial, the number of new sales launches have tempered down amid the sluggish sales performance. The City Loft by Yoma Land is the only new project launched which debuted in Q1 2019. It’s first phase which will consist of 147 units, is slated to complete in H2 2020, forming part of the master-planned development Star City in Thanlyin Township.
We anticipate future sales launches to temper down as the overall all sales take-up remain underwhelming. Similarly, sprawling the prevalent concern, several projects that were announced to debut during the quarter are likely to further postpone or with some additional phases to be shelved. Given such, we continually encourage developers to revisit their strategies and perhaps give their offerings an overhaul in order to meet current market requirements.
In the meantime, the future stock appears likely to remain substantial with more than 8,350 units due for completion in the span of two to three years, or an annual average of more than 2,700 new units. For the immediate year, Colliers projects the annual supply to reach a new record high of more than 5,000 rooms – a total of 29 condominiums. However, weak sales are driving construction progress further delays. Most projects are still likely to be pushed at least a year behind schedule, and new sales launches to remain subdued at least in the near term.
Given signs of success, we also see future developments to start veering towards the lower-tier segments and that more launches will likely arise from competitively-priced projects instead. We, however, acknowledged that this may come with some initial regulatory hurdles.
LOWER-TIER PROJECTS MORE ATTRACTIVE
The cumulative take-up rate witnessed a slight decline by 1% qoq to settle at 58% in Q1 2019. This was buoyed by the relatively high sales take-up recorded from recently launched lower-tier developments, especially City Loft. The overall sales performance during the quarter appeared to have been resilient despite the launch of both City Loft and Emerald Bay collectively at more than 600 units.
Buyers’ reluctance remains however noticeable. As such, aggressive sales promotions from various developers during the quarter was highly evident. Some projects have begun offering discounted prices along with flexible payment terms. Furniture such as washing machines and refrigerators are now also inclusive with the units in some select developments. The declining number of newly launched projects somehow also facilitated a sales uptick on the overall remaining inventory.
Similarly, developers continue to be wary. The number of unsold inventories is sizeable at almost 3,500 units; whereas the average monthly sales velocity per project dropped significantly to less than five units from what used to be high double-digit back in 2014. With some high-density projects failing to meet the required sales target, launches for the succeeding phases were shelved.
In a bid to recover and heighten project sales, a number of developers have started venturing into the lower-tier segment which have in fact have seen signs of success. The share of both mid and upper-mid projects in the citywide stock of pre-selling condominiums as of Q1 2019 grew to 52%. Despite the share of upscale developments remaining sizeable (48%), Colliers believes that future launches under the low and mid segments will potentially exert upward pressure on the overall sales take-up.
Overall, there remains a widely untapped demand for low and middle-income developments. Numerous factors are however discouraging developers to further venture into this segment. The high land values along with an onerous car parking regulation make it difficult for developers to justify more competitively priced products at smaller unit sizes. The lack of collective authoritative measures for Build-Operate-Transfer (BOT) land also remains to be a concern, especially for large-scale investments. We believe that changes in these regulations among others will be a major game-changer that could improve the business landscape for competitively priced products going forward. In fact, Colliers has already started initial discussions with key government agencies to help advise in multiple facets. Once these development policies are streamlined, we expect significant market recovery which should be reinforced with the eventual improvements in access to financing.
Source: Collier
For more information, please contact:
KARLO POBRE
Deputy Managing Director| Myanmar
+95 (0) 979 573 3378
Karlo.pobre@colliers.com
