Antony Picon lives in an old eight-storey Yangon apartment building, with a shabby sidewalk outside, and a single lift.
One would not guess that he is the managing director of real estate firm Colliers International’s Myanmar office, and goes to work everyday at the firm’s offices in one of Yangon’s smarter buildings.
But here in this old building, the 48-year-old Mr Picon gets 80 square metres for US$900 (S$1,148) a month. Compared with the rents for condos and houses elsewhere in the city, which offer just average standards compared with Bangkok, it is a parallel universe.
Real estate prices in Yangon, especially for foreigners, are too hot for many to touch, simply because there is an acute shortage. Rentals for offices and residences in downtown Yangon are now higher than in Singapore and Manhattan. And even with a massive building spree, there will be a chronic shortage for some years, industry analysts say.
In the better condo buildings in better locations, a rental fee of US$5,000 to US$7,000 a month is common. With one year’s rent usually required in advance, those numbers burn a lot of cash very quickly.
In the last 10 years, in the city of 3-4 million people, only up to 1,500 new residential units have been built, Mr Picon told an audience a seminar in Bangkok on Aug 29. And the whole of Yangon has only an estimated 60,000 square metres of office space – less than some big single buildings in cities like Bangkok and Singapore.
Before Myanmar’s new government opened up the country, backpackers could afford to stay in starred business hotels. Today, businessmen are staying in backpacker guest houses. This especially applies to those who make repeat visits; after the third or fourth visit staying in US$300 a night hotels, companies realise that it is just too expensive and their executives move to more modest digs paying US$50-US$100 and making do with crawl-speed wifi.
A lot of expatriates have had to adapt and go “local” to bypass the soaring cost of housing.The building where Mr Picon stays has no facilities. The old lift barely works. The power goes off all the time.
“Actually in terms of understanding Myanmar, it helps to live like a local,” he told The Straits Times.
“At the end of the day I am still better off than most by Myanmar standards.”
James, an international consultant who asked not to be identified by his full name, rents a 90-square-metre flat at the 8 Mile junction close to Myanmar’s international airport, for just US$450 a month.
Working from his flat helps, he said; with Yangon’s traffic congestion worsening by the week, it often took him two hours to reach the downtown business area.
But it was difficult to function, he admitted. He uses a wifi hotspot generated from his phone, and when the electricity is cut he can’t charge the phone so it runs out of battery. The Internet café a few metres away off the crowded sidewalk is hot and stuffy. In the middle of the night he often wakes up in a pool of sweat because the electricity is off.
“It’s an old apartment, in an old building, with dirty stairs, and it looks shabby,” he wrote in an email. “But inside with a lick of paint and little bit of designing, I have a luxury place.”
The government is trying to figure out ways to curb prices. At a press conference in Naypyitaw on Aug 30, Minister in the President’s Office U Soe Thane told reporters the government had suspended a plan to build a bridge across the Yangon river linking the main city to Dala township, a suburb of Yangon accessible only via a short ferry ride.
The reason: after news spread that a Korean firm had contracted to build the bridge, the price of paddy fields in the area surged from US$700 an acre a year ago to US$70,000 per acre, according to reports.
The high property prices are creating difficulties for foreign investors, the minister said.
Mizzima News last week quoted Mr Horace Ma Chi Wing, executive director of the Hong Kong-based Chevalier Group, as saying: “The rates really scare us, it is too high. Not so many small and medium enterprises can afford such a high rate.”
From an investment point of view, the pent up demand for real estate space would seem to be an open invitation for speculators, but thus far buyers are all locals flush with cash squirreled away under the years of military rule, when there were no financial investment options available barring gold, Dollars and real estate.
If a foreigner wants to buy a condo, as is possible say in Bangkok and Singapore, the foreign investment law is clear cut – but the condominium law is not yet ready.
“We keep hearing it is in the works,” Mr Picon said at the conference. It is widely expected that the law will allow foreign ownership of condos, but until it is passed and details known, there is no guarantee that a foreign investor buying a condo would be able to take his money back out.
The question of remittances overseas applies to investors across the board. While the law in theory allows an individual to repatriate money abroad, in practice there is still no mechanism to do it. Sitting in Yangon, a local trying to buy something from an overseas-based website like Amazon.com for instance, will still not be allowed to pay even though economic sanctions have been lifted, said Cyrus Pun, head of Yoma Strategic Holidings’ real estate arm. The company, listed in Singapore, is the biggest property developer in Yangon.
Speaking at the seminar in Bangkok, Mr Pun said: “Many investors come in expecting very, very rosy returns.”
But for foreigners wanting to move into that market, in the absence of the financial transfer mechanisms and the condominium law, he had a word of caution: “Quite frankly, no one can guarantee you an exit.”