Mandalay property market hits COVID-19 doldrums, but prospects intact

Mandalay’s real estate sector had been growing steadily before the COVID-19 pandemic struck but land prices may now start falling, opening up a rare opportunity for buyers to take a serious look at the market, according to a major developer in Myanmar’s second largest city.

U Kyaw Kyaw Win, head of New Star Light Group, told The Myanmar Times that the global health crisis had affected his portfolio and the broader real estate industry in Mandalay.

“We are reconsidering our new project development plans to align ourselves with the changing economic outlook,” he said.

Land prices are expected to fall or, at best, remain stable over the next 12 months, he added.

With rising unemployment and the business environment deteriorating, investor appetite in Mandalay properties will “definitely” be affected, said the businessman.

That drop in sentiment and demand could dampen real estate prices in Mandalay, which had been on the uptrend over the past few years. In that light, in could be a good time for those interested in entering the market to take a closer look at what’s available.

New Star Light Group builds and operates the biggest commercial-residential complex in Mandalay. The K300 billion (US$220 million) Mingalar Mandalay mixed development project covers around 20 hectares. The first phase, including a shopping centre and condominiums, was completed in 2014.

The second phase of upscale condos, a five-star Pullman hotel from French group AccorHotels as well as premium villas were finished last year and a Grade A office tower is scheduled to
complete end of this year.

The real estate giant also built the Mandalay Convention Centre, one of the largest properties for meetings, incentives, conferences and exhibitions in upper Myanmar.

The projects had been expected to capture rising investor interest in Mandalay as businesses expanded beyond Yangon and as the city’s population began to swell.Before COVID-19, the occupancy rate for residential properties had been increasing by about 10 percent year-on-year and rental rates were stable. Similarly, demand for commercial property had been growing for the past two years, with commercial rentals up by about 5pc year-on-year until March and occupancy rates of about 85-100pc, U Kyaw Kyaw Win said.

But COVID-19 hit key industries including retail, tourism, manufacturing and border trade in Myanmar and Mandalay’s economy was also affected. The Mandalay Region Chamber of Commerce and Industry said small local businesses have taken the hardest beating and some have been forced to suspend operations.

As a result, New Star Light has had to waive two-months’ rent for commercial properties in Mingalar Mandalay since the outbreak occurred. It has decided to provide discounts for the next year as demand fell. It also waived rental fees for six months for booths in the outdoor area run by small local vendors.

Good prospects

Property consultants are hopeful that Mandalay’s real estate prospects will only improve in the long term, however.

“There’s a tremendous amount of potential in Mandalay for residential growth,” said Stuart Deed, co-executive director of Yangon-based Picon-Deed Property Consultants.

Mandalay’s real estate market remains underdeveloped compared to other second-tier cities in the Southeast Asia region, Mr Deed said. The city has a population of 1.2 million according to the 2014 census, much smaller than the commercial capital of Yangon.

He said the key to sustainable growth in Mandalay property lies in delivering good quality landed housing in estates, where buyers feel safe and confident in the delivery of services like water, electricity, maintenance, landscaping, cleaning and security. Owning landed property means owning the land and not just the building itself.

Tony Picon, co-director of Picon-Deed and ex-chair of BritCham Myanmar, believes it will take longer for dedicated office space to take root in secondary cities like Mandalay.

“Given the importance of Mandalay we could see some small single tenant office buildings springing up such as from banks and eventually a multi-occupier building or two.”

On the commercial side, the need for mass retail remains compelling as demonstrated by the modern retail complex of Mingalar Mandalay, Mr Picon said. But more development is likely to be in the form of smaller malls similar to community malls in Thailand.

“There are significant population centres close by to Mandalay so a destination mall attracting these people on day trips could also be feasible if planned well with good entertainment and food and beverage options,” he added

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Source : Myanmar Times

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