<p><img alt="" src="/documents/10204/0/Myanmar-invst-feature-lead-compressor.jpg/85b117eb-03cc-40cd-8ca4-f3098da4ad05?t=1536272620277" style="width: 1400px; height: 640px;" /></p> <p align="left">“If I could put all my money into Myanmar, I would,” veteran U.S. investor Jim Rogers declared in 2012. Rogers, who co-founded the Quantum Fund with hedge fund billionaire George Soros, has lived in Asia for many years and knows a bargain when he sees one.</p> <p align="left">When Myanmar opened up to the world after decades of military rule, hopes were high that democracy would be restored and the economy invigorated. From tourism to telecoms, business opportunities abound as industries that had long languished in the absence of private competition were roused out of their slumber.</p> <p align="left">Local consumption soared amid a thriving economy, with the Burmese now plugged into global trade, wearing Nike, drinking Coke and surfing smartphones and -- along with a growing expat community -- spurring demand for higher-end real estate.</p> <p align="left">There have been many economic success stories since the early days of the country’s re-opening for business, and the economy has experienced brisk growth, but for players in the country’s property sector the deflating realization that they may have jumped the gun is setting in as a painful glut emerges.</p> <p align="left">Yangon’s condominium stock totalled more than 6,600 units at the end of the third quarter of 2017, reported real estate services firm Colliers International. The new supply for last year was expected to reach around 1,200 units—a similar level to 2015—but the industry has been plagued by construction delays caused by flagging sales, and will likely get worse with more than 10,000 units in the pipeline.</p> <p align="left">Colliers said it expects most projects to be pushed at least a year behind schedule, with new sales launches to remain subdued at least in the near term. And even as last year saw “a slight uptick in demand following extensive pricing promotions for many projects… Colliers sees the performance as temporary, and the strategy as financially unsustainable. We advise developers to look long term instead.”</p> <p align="left"><img alt="While downtown Yangon has more than its fair share of colonial architecture, modern hotels, office buildings and residential condominiums are giving it the feel of a contemporary Asian capital" src="/documents/10204/0/myanmar-investment-feature-4-compressor.jpg/82310989-ebcf-49b1-a53a-6851b65abeda?t=1536273502239" /></p> <p align="left">It is expected that by the end of this year there will be 45 condominium projects, nearly half of which will be situated in the Inner City Zone. Some of the big developments slated for completion in the first half of this year include The Atrium, a 13-storey building with a swimming pool and dance studio, by Yadanar Mying Construction Co. Ltd.; and Red Hill, a 16-storey luxury tower by Naing Group Construction Co., Ltd. that was due to be completed by 2015. The tower will combine office and residential space, and will include penthouse apartments at the top, along with an infinity pool.</p> <div class="pull-quotes-container">Various projects were conceived when everybody thought Myanmar was on a massive upward trend and was going to go on a boom. But now those projects are being delivered onto a market which is basically failing on several different levels</div> <p align="left">Such luxury developments come at a challenging time for the industry, which property experts say the market is not ready to receive. Many of these developments either in the pipeline or launching were conceived in those heady days when property was expected to boom.</p> <p align="left">Richard Emerson, managing director of independent international property advisory firm Emerson Real Estate, says that Myanmar went “from a market where there was basically no built stock five years ago to a market wherein suddenly all those projects conceived in the day when everybody thought Myanmar was on a massive upward trend and was going to go on a boom, all those projects are being delivered into a market which is basically failing on several different levels.”</p> <p align="left">Cyrus Pun, head of real estate at investment group Yoma Strategic Holdings, affirms this, saying the mid- to high-end markets have slowed significantly in the last 12 months or more as the excitement that had filled investors is subsiding.</p> <p align="left"><a href="http://www.property-report.com/detail/-/blogs/building-sector-triumphs-at-the-annual-propertyguru-myanmar-property-awards-20-8" target="_blank"><strong>More:&nbsp;Building sector triumphs at the annual PropertyGuru Myanmar Property Awards 2018</strong></a></p> <p align="left">Pun says much of the evidence of weak sentiment towards residential real estate doesn’t take into account the many smaller condominium projects that have been quietly canned by developers. “People are much more inclined to invest in cheap units in the hope their value appreciates,” he says, adding that “on the higher end properties for the last 12 months or so, things have really quietened down… In some isolated areas there is a lot of activity going on. There seems to be a lot of low-cost development being planned and sold. And that seems to be gaining a lot of traction.”</p> <p align="left">Pun says he has sold a few houses recently priced above USD1 million, suggesting there is a lot of cash floating around, but it is being hoarded.</p> <p align="left">Strangling demand further is the absence of foreign buyers in the market. In early 2016 the Myanmar Parliament passed the hotly anticipated Condominium Law, which allows foreigners to buy up to 40 percent of condominium apartments in any given block, provided the apartments are on the sixth floor or above.</p> <p align="left"><img alt="Myanmar’s parliament also passed legislation last year to ease restrictions on foreign investment" src="/documents/10204/0/myanmar-investment-feature-3-compressor.jpg/457678fd-2a6e-44c1-b4cc-4e30d879d113?t=1536273707421" /></p> <p align="left">With Asian investment, particularly Chinese, pouring into numerous real estate markets across Asia, investors are hopeful that, once enacted, the law would draw some of the money into Myanmar. Yangon parliamentarian U Khin Shwe has said the new law could cut Myanmar’s trade deficit by up to one-quarter, pulling in at least USD1 billion for the government.</p> <p align="left">An analysis at the end of last year by Lincoln Legal Services (Myanmar) Ltd. pointed out the sketchy status of buying and owning property presents numerous hurdles to securing finance. Contrary to land, apartments presently cannot be registered so there is no certain way of checking who owns an apartment. “Potential buyers risk purchasing from a fraudulent owner, losing the apartment when the real owner turns up. In the same vein, it is risky for a lender to accept an apartment as security for a loan,” the law firm points out. “Private lenders might accept an apartment as security, but banks are reluctant as they find it hard to check the title. Consequently, even legitimate apartment owners find it difficult to use the apartment to raise money.”&nbsp;</p> <p align="left">The Condominium Law could provide much needed clarity and security to such property-related investments. But many are skeptical it will happen soon since the government decided to amend these rules following the bill’s passage. Says Emerson, “The problem in Myanmar is how long is soon, because this has been on the table as far as the government is concerned for the last three years or more. It got signed off by Parliament in 2016 and you still can’t apply the law that’s been taken through Parliament.”</p> <p align="left"><a href="http://www.property-report.com/detail/-/blogs/are-myanmar-s-real-estate-fortunes-about-to-chang-4" target="_blank"><strong>More:&nbsp;Are Myanmar’s real estate fortunes about to change? </strong></a></p> <p align="left">Myanmar rarely makes it into the news for positive reasons these days, as its Rohingya crisis rages. More than 700,000 have fled persecution and the destruction of their homes in the northern Rakhine province neighbouring Bangladesh.</p> <p align="left">The horrifying scenes may be miles away from Yangon and other key cities, but it carries a severe reputational risk for Western companies, along with deterring many tourists and other visitors to the country.</p> <p align="left">“The tourism market has gone backwards considerably since 2013 and ’14 when it was growing every year. You’ve now got a lot of people not coming to Myanmar because of the Rakhine problem,” reports Emerson, adding that hotel room rates have plummeted following a wave of big hotel launches.</p> <p align="left"><img alt="Yangon’s skyline continues to change, with new developments entering the market. But with supply outstripping demand, there is a feeling that many of the units on the market will remain empty for the long term" src="/documents/10204/0/myanmar-investment-feature-2-compressor.jpg/737bb395-5cc3-47cc-ba9a-c85f156ce72a?t=1536273808879" /></p> <p align="left">While not specifically mentioning any political turmoil, the World Bank states in a recent report that based on data from the first 11 months of 2017/18, approved FDI declined compared to the year prior, which was already well below previous years’ levels.</p> <p align="left">However, real estate is still doing relatively well—just not the residential sector. Approved FDI in real estate activities reached USD1.1 billion in 2017/18, an increase of 21 percent compared to the growth of 10 percent in the previous year.</p> <p align="left">“Demand for existing office and retail space in modern shopping centers in major cities is rising, but new projects face slower growth in demand for pre-sales, and there are concerns about potential excess capacity, particularly for condominiums. There is anecdotal evidence that private investors are holding back investment in high-rise building projects, shifting instead toward small and affordable housing projects.”</p> <p align="left">Unless Myanmar’s economy improves and continues to be deprived of the vast cash that’s been hoarded, and foreigners are given the official green light to invest, the industry is reluctant to put a brave face on its problems. Defiantly forging ahead with their projects, however, are the big developers. Whether their courage pays off or they become the next victims of their own ambition, only time will tell.</p> <p align="left"><em>This article originally appeared in Issue No. 149 of <a href="https://www.magzter.com/TH/PropertyGuru-International-(Thailand)-Co.,Ltd/Property-Report/Business/" target="_blank">PropertyGuru Property Report Magazine</a></em></p>

<p><img alt="" src="/documents/10204/0/thailand-investment-feature-lead-149-compressor.jpg/b1623c9e-7798-4c26-b1db-ceda5750a840?t=1535540262850" style="width: 1400px; height: 640px;" />Back in 1895, a wealthy Chinese businessman engineered the digging of a canal running westerly from the Chao Phraya River. It became such a crucial throughway for transporting goods and people inland from the port of Bangkok that King Chulalongkorn granted the construction magnate, Chai Sua Lom, the name Luang Sathon Rajayukta in appreciation.</p> <p>It was at this juncture that the Thai capital turned its attention away from the river. Sathon built a magnificent mansion along his canal, and Bangkok’s wealthy followed suit, trading more-cramped riverside homes for leafy expanses. Up they marched along what is now Wittayu (or Wireless as it is better known) Road, erecting stately houses in lovely gardens. Foreigners took notice, making deals for sites including the vast American, Dutch, and British Embassies. Sathon’s house itself became the Russian Embassy in 1948.</p> <p>It wasn’t so long ago that the city’s elite seemed like they’d continue their outward expansion ad infinitum, perhaps decamping en masse to the suburbs that spread out in subsequent generations. But the tide has definitively turned. After a few years of a trickle-in resurgence of the highest-end properties, 98 Wireless, a super luxury residential-only building on embassy row whose average cost was a whopping TBH550,000 per sqm (USD16,775), officially opened last year, along with two other showstoppers not far away: The Ritz-Carlton Residences in the glittering jigsaw MahaNakhon Tower and Magnolias Ratchadamri.</p> <p>These days the moneyed class is firmly re-entrenching in the city centre, this time taking up residence not in sprawling teak villas but shiny skyscrapers with park views, SubZero appliances, and the odd communally owned chauffeured Bentley at their disposal.</p> <p>“What we have seen over the last 10 years,” says Su Lin Soon, CEO – Development at Frasers Property Holdings (Thailand) Co., Ltd., “has been a shift towards higher quality, a willingness to pay to be near mass transit, and buyers continuing to move from landed housing to condominiums located within the CBD.”</p> <p>Though luxury and ultra-luxury units represent only four percent of Bangkok’s condominium market, the segment is growing like gangbusters. JLL Thailand figures reveal the average of 1,560 new upscale units launched annually between 2012 and 2014 has leapt to an average of 8,000 new upscale units between 2015 and 2017.</p> <div class="pull-quotes-container">These days Bangkok’s moneyed class is firmly re-entrenching in the city centre, this time taking up residence not in sprawling teak villas but shiny skyscrapers with park views, SubZero appliances, and the odd communally owned chauffeured Bentley at their disposal</div> <p>This increase is remarkable considering it includes a 135 percent increase year-on-year from 2016 to 2017, according to Knight Frank, accounted for by the official mourning period following the passing of beloved King Bhumibol Adulyadej. This year, more than 8,700 units are planned for completion, bringing the total luxury/ultra-luxury condo stock to 25,900 units—a 50 percent increase from 2017.</p> <p>Prices have been climbing (Knight Frank pegs the average prime/super-prime condo goes at around THB300,000 per sqm) and already in 2018 the market has seen two record-breaking seismic shakes: both the most expensive land deal ever (on a per sqm basis), and the largest deal ever (based on the total price). SC Asset PCL reportedly acquired a development site on Langsuan Road for THB3.1 million per sqm, while a joint venture between Thailand’s Central Group and Hong Kong Land acquired the site of the current British Embassy for THB18.7 billion. JLL reports sundry smaller or less expensive prime sites having been recently acquired by leading condo developers Raimon Land, MQDC and Ananda Development.</p> <p>As Bangkok booms— 2017 saw 3.9 percent year-on-year GDP expansion and an 8.6 percent increase in visitors to Thailand—you’re less likely to see the quaint second-world street tableau of old villa cheek-by-jowl with new tower, especially in the central core. “The most sought-after areas tend to be ‘one-of-a-kind’ locations, such as close proximity to large parks or the river,” says Frasers’ Soon. Some residential buyers are following firms shifting back to the CBD, adds Soon, “trends indicative of Bangkok’s large and expanding size, and typical of the urban shift and ongoing progress that occurs for all major global cities.”</p> <p><img alt="The Chao Phraya River in Bangkok has become a centre for the construction of new condominiums and hotels in Thailand’s desirable capital" src="/documents/10204/0/thailand-investment-feature-149-2-compressor.jpg/e08d5e2a-a072-471f-b87f-15c5e768da92?t=1535540995399" /></p> <p>In other words, Bangkok is growing up, and coming home—sometimes on the BTS SkyTrain. “We see the role of infrastructure, particularly mass transit, as a key driver for luxury residential,” Soon says, adding this is in line with a global “shift to enhanced quality, appreciation for sustainability, and integration of technology and smart city innovation.”</p> <p>On the supply side, Marciano Birjmohun, associate director for Residential Department at Knight Frank Thailand, points out “luxury condominiums were not only launched by public companies; a selection have been launched by fairly new players in the high-end market, who kept momentum and created a visible presence.”</p> <p>These new players explain the abundance of supply on the market to which Knight Frank attributes last year’s slipping of the average take-up rate per luxury/ultra-luxury property to 67 percent. (Note: overall market demand as counted by number of this type of units sold still increased.)</p> <p>These types of sales are about location, branding, and perks. Birjmohun calls them “trophy properties”: rare architecturally or historically preserved properties, extraordinary yields, spectacular views, over-the-top amenities. Think high design, brand-name fittings and furnishings, and resort-style services.</p> <p><a href="http://property-report.com/detail/-/blogs/new-thailand-lease-laws-are-ruffling-landlords-feathe-8" target="_blank"><strong>More:&nbsp;New Thailand lease laws are ruffling landlords’ feathers</strong></a></p> <p>“Prices are being pushed up in particular for rare unit layouts such as penthouses and duplexes,” he says. At 98 Wireless—which boasts American oak and mahogany, Portuguese limestone and Italian marble, along with its on-site spa and concierge service—and The Residences Mandarin Oriental Bangkok, penthouses reached price points exceeding TBH650,000 per sqm.</p> <p>Keep an eye on up-and-coming convenient throughways Rama IV and Rama IX Roads, though for now the hottest spots remain the city’s stateliest. According to CBRE, riverside locations commanded the highest average prices in the luxury/ultra-luxury sector last year, at TBH321,750 per sqm, followed by lifestyle corridor Sukhumvit at THB255,954 per sqm, and the Silom-Sathon CBD area at THB233,583.</p> <p>Knight Frank credits the price buoyancy to higher land prices in prime areas and pent-up demand from buyers who held off purchasing in 2016. “Those who think the luxury market is driven solely by foreign investors should think again,” Birjmohun says. “Affluent Thais remain essential to this engine.” Most purchase these blue-chip properties with cash, to live in, or as investment—thus making them impervious to issues that bedevil those further down the real-estate food chain, like compressing rental yields (now at an average of only three percent annually), recently tightened residential leasing and lending laws, and rising mortgage rates.</p> <p>Still, one must account for the approximately 20 percent of demand coming from foreign investors, “lured by relatively more affordable prices compared to developed markets, many of which do not offer more attractive yields than Bangkok,” says Winai Jaiton, director of Marketing Communications at JLL. “In most cases, products of similar quality in Bangkok are half as expensive as in Singapore and five times cheaper than in Hong Kong.”&nbsp;&nbsp;</p> <p><img alt="Phuket continues to be one of Thailand’s most desirable locations and several new luxury projects are luring in investors" src="/documents/10204/0/thailand-investment-feature-149-3-compressor.jpg/21272efb-61e1-4387-aa9c-758b14396da5?t=1535541364061" /></p> <p>Elsewhere in the Kingdom, the most promising real estate gamble is its most popular island. Last year Phuket saw two villas at Layan Residences by Anantara and one in Avadina Hills by Anantara selling at prices ranging from THB300 million to THB500 million, according to Prakaipeth Meechoosarn, CBRE’s head of Advisory and Transaction Services for Resort Property Sales, telling the Bangkok Post.</p> <p>“Phuket seems to unwind from its hibernation with more residential projects launching and increasing tourism numbers,” Birjmohun says. “We have seen more Phuket-based developers starting to advertise across Asia and Europe again, and the influx of Chinese buyers is something notable.” In the first four months of 2018, international arrivals grew 28 percent year-on-year to 2.1 million, with the Chinese accounting for 40 percent, according to Bill Barnett, managing director of C9 Hotelworks. By year’s end, there will be at least 40 cities in Mainland China with direct routes to Phuket.</p> <p>“Phuket and Chiang Mai are seeing China become a large-scale market and there is traction in midscale and upscale condos,” Barnett says. “Samui is a small niche market and perhaps it is better to retain that focus. Pattaya remains stressed,” trying to maintain balance in a market dominated by foreigners.</p> <p>Down the southwestern shore from Bangkok, some see hidden opportunity. “Hua Hin is beautiful in all aspects, with reasonable property prices, a good variety of projects, reputable developers, and no mass tourism. It has always been favourable for Western buyers and retirees,” Birjmohun says. “But the uptake rate remains low. One reason is accessibility.”</p> <p><img alt="The resort town of Hua Hin combines a beach lifestyle and affordable prices with easy proximity to Bangkok" src="/documents/10204/0/thailand-investment-feature-149-4-compressor.jpg/db4c4058-084a-47e2-a45f-bce362f1bbcc?t=1535541265862" /></p> <p>That’s changing though, as AirAsia recently launched the first regular international direct flights into Hua Hin airport from Kuala Lumpur. Likewise, back in Bangkok, the future is looking bright for the much-heralded Iconsiam development—home of those ceiling-busting Residences Mandarin Oriental—on the Thonburi side of the Chao Phraya now that the river-hugging BTS Golden Line has been approved.</p> <p>What else can high-value property spectators look forward to in Thailand this year? “The market has not reached its peak yet. It’s very understandable because Bangkok’s status on the world chart is rising,” Birjmohun says. “We will be in for a ride in 2018. There is still supply on the market from 2017. And there are five to six new luxury projects launching in Asoke, Thonglor and Lang Suan—with pre-sales prices starting at THB400,000 per sqm. Average selling prices are predicted to continue rising in line with land scarcity in prime areas and mounting land prices that leave developers no choice but to deliver high-margin luxury units to cover costs.”</p> <p>Can we get a Michelin-starred chef, a petting zoo, and a Tesla with that penthouse?</p> <p><em>This article originally appeared in Issue No. 149 of <a href="https://www.magzter.com/TH/PropertyGuru-International-(Thailand)-Co.,Ltd/Property-Report/Business/" target="_blank">PropertyGuru Property Report Magazine</a></em></p>