The rapid transformation of the political environment in Myanmar has spurred an even more rapid surge in economic activity and the serviced apartment sector will continue to benefit from the influx of new businesses because of a scarcity of quality housing for expatriate businessman and professionals.
According to the Asian Development Bank (ADB), Myanmar’s economy grew by 6.3 per cent last year, accelerating from the average of 5.4 per cent growth in the previous two years to make it the third-best performing economy among the emerging Asian countries.
The lure of Myanmar’s potential and the lifting of economic sanctions by the European Union and the United States have resulted in a sharp increase in the number of business travellers.
Data from Myanmar’s Ministry of Hotel and Tourism shows tourist arrivals at Yangon International Airport have increased by 53 per cent in the year to date. This is after the record high of 560,000 visitors to Yangon last year, of which 115,000 were business travellers and 233,000 were Foreign Independent Travellers (which would include individuals running businesses).
An increasing number of foreign companies are sending management-level teams to set up operations or conduct more in-depth market studies. Large multinationals are also increasing their presence in the country.
Domestically, new company formations are also increasing as Myanmar citizens seek to anchor themselves to reap the benefits of renewed confidence in the economy. New company formations increased by 69 per cent in fiscal year 2012 and 30 per cent in FY2013. Many of these domestic firms are also actively hiring foreign expertise or service providers to accelerate the growth of their businesses.
Against this backdrop, the demand for serviced apartments has spiked. The lack of development over the past 10 years and a scarcity of quality housing projects have resulted in an undersupply of homes for the incoming wave of foreigners. Serviced apartments have remained at near full occupancy for most part of the last two years, with the waiting list of tenants growing by the day. This is worsened by the lack of good quality condominiums as substitutes.
At present, the stock of serviced apartments comprises the Grand Mee Ya Hta Executive Residence, Sakura Residence, Marina Residence, Golden Hill Tower Executive Apartments, Espace Avenir and MiCasa Hotel Apartments. About 40 per cent of these 743 homes are one-bedroom units, 38 per cent are two-bedroom units, 18 per cent are three-bedroom units, while 3 per cent are studios and the remaining 1 per cent being four-bedroom units.
At present, the waiting time for the more sought-after serviced apartments is three to six months on average, while at the extreme end, the wait for a unit in Golden Hill Tower is a year.
The average rent for a one-bedroom unit has crossed US$4,000 (S$5,100) a month this year, while those for two- and three-bedroom units are above US$5,000 and US$6,000, respectively. As at end of last month, the weighted average rental rates for one-bedroom units increased by 3.1 per cent while those of two-bedroom and three-bedroom units fell by 2.5 and 0.5 per cent, respectively, compared with the end of the first half of this year.
The slight easing of the average rental rate last month is just a temporary respite following very rapid increases over the last two years. The stronger rental growth for the one-bedroom units is a reflection of demand from single expatriates. In addition, there is also a shortage of smaller-sized apartments in the condominium rental market. The uptrend in rentals is expected to continue.
The Shangri-La Residences is expected to be completed by the fourth quarter this year, adding 240 rooms to the market, but this is insufficient to match the pace of increase in demand in the near term. As of July, four months before completion, all of its two-bedroom units have been pre-committed while only a limited number of its three-bedders is still available.
The ADB report forecast an average growth rate of 7 to 8 per cent per year for Myanmar over the next decade. A recent report by the McKinsey Global Institute estimated that by 2030, the number of people living in Myanmar’s cities could increase by 10 million, its economy could grow to four times its current size and its consuming class to grow to 19 million people from the current 2.5 million. As the economic prospects continue to improve, the outlook for the serviced apartment sector looks bright.
The shortage of good quality accommodation in the private housing and serviced apartment sectors will take several years to resolve as the underdevelopment in the last two decades cannot be corrected in the short term. With the increasing number of foreigners and returning Myanmar nationals sustaining demand, the serviced apartment sector should remain one of the best performing property sectors in the coming years.
By Tan Kok Keong – Executive Director at Asian Acre Advisors, a Myanmar-based real estate and business advisory
Source : Today – 23 Aug 2013firm.