The dilapidated city of Yangon, Myanmar’s commercial center, which is plagued by brown outs and derelict infrastructure, is becoming a surprisingly hot property market, as I reported on August 14 for Inside Investor. Ironically, the city’s shortcomings — as well as the privatization of previously government-owned estates — are actually a major contributor to skyrocketing premium home prices, which rose 20 per cent in 2011.
HR executives of multinational corporations that have recently announced the opening of Myanmar offices invariably demand serviced apartments for their employees that come complete with such amenities as gyms, pools and, of course, back-up power generators.
This precipitous demand, combined with the paltry supply of prime condominiums currently on the market (six to be exact), has tweaked the supply-demand dynamic that guides property prices. Monthly rent in these complexes now goes for about $2,500 a month for a studio-sized apartment, twice that compared to 2011.
According to the Myanmar Times, sales prices per square foot have reached up to $343 even in secondary locations, such as Dagon township in northern Yangon.
Such astronomical price hikes in a notably undeveloped country drawn similar comparisons to those in the dizzyingly overpriced market of Luanda, the capital of oil-rich Angola, where the average monthly rent for a two-bedroom apartment is $7,000.
The comparison game can get nutty here. To further examine the contrast in “distorted” property markets, we can compare the current average price per square foot of prime apartments in Los Angeles at $281 and Dubai at $310. Of course, these are mostly the result of a since-popped property bubbles in markets now adjusting to reestablished dynamics.
That Yangon prime property outstrips LA and Dubai speaks volumes for the natural volatility of real estate assets. The specter of a property bubble will ever loom when grandiose distortions on this scale crop up, but the size of Yangon’s fledging market should make forecasts easier to gauge.