Demand for rentals in Yangon is predicted to continue rising through 2009. Pic: Hein Latt Aung

RENTALS are likely to dominate activity with Yangon’s real estate market during the first six months of 2009, say a number of sources within the industry.

The experts said the highest real estate prices for 10 years had pushed the market for sales into virtual stagnation. These high prices, in turn, had been pushed upwards by a combination of factors – including tax law changes and profound drop-offs in competing investment sectors such as cars and gold – during 2008.

U Bo Bo Kyaw, the manager of Sei Khun Naung real estate agency, said he believes that the global financial crisis that still rages will deter any further investment in property, with potential investors simply waiting and watching.
“I don’t think the market will be overly forceful during at least the first half of 2009, if not the whole year. I expect that sales will continue to be stagnant and I think prices will also remain steady,” he said.

However, the company’s assistant marketing manager – U Hein Zan Aung, said some home owners have dropped their prices fractionally, perhaps by as much as 5 percent since November.

The reason for this was to quickly increase their cash flow, he said.
“Owners who want to sell their property in hurry have simply had to drop their asking prices, which have – on average – been higher by about 10pc,” he said.

Daw Thiri, the manager of Pyae Wa Real Estate, also noted that there is little interest in sales, but added that those deals that are being cut are closely negotiated, with eventual sales prices close to the initial evaluation.

“Most of the final agreed prices are very close the first valuation. Back in October there was usually a difference of about 20pc between these two – buyers were paying much more than the house was valued for,” she said.
Daw Thiri added that the amount of company clients dropped by half in December.

U Zaw Zaw, the manager of Unity real estate agency, said that 90pc of his company’s dealings since November have been in rentals. He predicted that the trend would continue.

“Interest in the sales is still sluggish but there has been strong demand in the rentals market, which has pushed rental prices up by about 10pc. I think there’s still more room for prices to increase though, especially if demand remains strong throughout the year,” he said.

One property owner in Bahan township said he’s taking advantage of the strong rental market by renting out his house and instead living in his smaller condominium.

This, he said, would bring in about US$700 a month in rental from the house when he was only renting the condo before for about K250,000.

U Zaw Zaw noted that the upward pressure on rental prices – if it continues – could put low-income families into difficult situations.

A cautious approach has also been adopted by developers like U Ko Ko Htway, the chairman of Taw Win Family Construction.

He said presales for apartment blocks and condominiums are likely to be slow this year and developers will have to find other ways of making money.

“The construction market is directly linked with the overall business climate, which is not good at this time. For this reason new construction works are unlikely for the time being,” he said.

One economist told The Myanmar Times that all the traditionally strong investment markets – gold, property and vehicles – look highly uncertain and investors are avoiding them for now.