Colliers Property Report – Yangon Condominium Q3 2020

Summary & Recommendations

While sales are presently impacted from prolonged lockdown measures, buyers’ preference towards lower tier condominiums appears continually emerging. This has also been recently reinforced with lowering of interest rates by the Central Bank. Meanwhile, given the relatively static unsold inventories, developers are continually encouraged to ramp and speed up sales efforts. This, in anticipation of competition arising from deferred projects likely to resume sales launches starting 2021.

As the condominium market faces strong headwinds, product preferences are also evidently shifting. We recommend developers and investors to start exploring offerings towards basic apartments as well as low to mid-range residential developments – which appears to generate heightened interest especially among end users. In fact sales uptick has been more profound on projects with prices ranging between USD30,000 to USD200,000 per unit.

RISING INTEREST TOWARDS LOWER TIER SEGMENTS

Following the revamp in our grading methodologies, the total number of existing condominium supply stock in Yangon was rebased in Q3 2020. The latest number is then revised to 13,050 units which increased by 5.8% YOY. The uptick in supply was mainly driven by the completion of The Atrium, Shwe Zawana Condo, Complex 45 and the partial completion of City Loft – Phase 1, collectively representing more than 700 units.

Despite underwhelming sales activities given the lockdown measures, stronger interests appears to have shifted towards lower tier developments. Additionally, almost all of the projects are located in the Inner and Outer City Areas also indicating the gradually burgeoning demand for mid-tier products in suburban townships.

Among the projects, City Loft in Star City in fact generated the strongest sales bookings and interest. This new condominium development by Yoma Land is the third project component in the estate, offered as a more affordable product type. Meanwhile, majority of the new completions initially scheduled in the past six months were postponed to either the first or the second quarter of 2021. This, given the ongoing delays in obtaining building completion certificates. With the continuing slow construction progress and further delays in groundbreaking, the near future is expected to continually witness the same trend. Nonetheless, some projects are still likely to complete in the immediate quarter, including Rose Hill Residence and the Lake Suites.

Both are expected to reinforce the emergence of Yangon’s Inner City as new hubs particularly in Yankin and Bahan townships. Despite underwhelming sales performance, the citywide average take-up rate remains virtually unchanged at 61%, at least on a quarterly basis. The improvement in sales take-up since Q3 2019 however was mainly driven by the lack of new project launches especially in the last two quarters. Over the past year, the average take-up rate was noticeably high in the mid and upper mid segments with an increase of 2.9% YOY. Even with the moratorium on foreclosure proceedings and mortgage forbearance programs offered by banks, the market outlook, not least for high-end segment, however remains relatively uncertain.

As buyers become more cognizant of the economic conditions, sales activities in general are likely to remain subdued at least in the immediate present with demand likely to be shifting mainly for end-use purposes. The heightened interest in lower tier projects may also help sate the overall sales take-up going forward, also as prices trend further downwards. Colliers has recorded 10 to 15% adjustment in sales prices over the past six months.

Better sales performances were also observed in condominium
projects priced between USD100,000 and USD200,000 per unit. Besides condominiums, sales for basic apartments have witnessed more recurring transactions to which remains a widely untapped market. Developers are also advised to consider expanding this segment amid a broader catchment demand from both end users and investors alike.