BANGKOK • Confusion over a law allowing foreigners to buy condominiums in Myanmar is prolonging a slowdown in its residential property sector, highlighting the challenges of regulatory flux in the frontier market.
The legislation adopted in January last year leaves unanswered questions, such as whether it applies to existing apartments, hurting efforts to woo investors. The outlook now depends partly on by-laws that the government is working on to clarify the legislation, according to local developer Yoma Strategic Holdings.
"We expect the by-laws early this year," Yoma executive director Cyrus Pun said in an interview. "It'll be a big change for the sector. There was a very bullish market from 2011 as the economy opened up and investment came in, but residential property has quietened down quite a lot in the past 18 months."
The cooling property sector and a dip in rapid economic expansion have dented some of the earlier investor euphoria for the South-east Asian nation.
The 2016 law permits 40 per cent foreign ownership of a development, but lacks details such as the exact process for a project to qualify as a condominium.
Mid-tier condominium prices fell about 41 per cent from 2014 to last year, Colliers International Group data shows, while luxury unit prices slid 22 per cent.
The timeline for implementation of the by-laws remains cloudy. While the rules have been drafted, it is unclear exactly when they will be sent to Cabinet for approval, though officials are working as fast as they can, said the Department of Urban and Housing Development.
In time, the rules allowing foreigners to buy property could be thought of as a game changer, but they will have little effect on sales in the short to medium term based on current market conditions, said Mr Joshua De Las Alas, an analyst in Yangon for Colliers International.
"Current condominium selling prices in Yangon are still very much higher than anywhere else in South-east Asia - making it a risky investment in the short run," he said.
Yoma's Mr Pun said investors can expect residential rental yields of 8 per cent to 12 per cent, adding that there remain untapped opportunities for the longer term.
Tapping the mass-market opportunity depends in part on an expansion of Myanmar's nascent mortgage industry. Most buyers currently are purchasing upscale apartments in cash.
The clarification of the condominium law should woo buyers from Thailand, Singapore, Hong Kong and China, with China likely to be the biggest source of demand, said Mr Pun.
"Some Chinese buyers are already coming in to buy, but through alternative channels," he said. "They may have structured deals where they are making an investment rather than buying an actual title. The condominium law would open the market to retail buyers."
BLOOMBERG
