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Research & Forecast Report

Yangon | Condominium Market 2Q 2014

Buyers veer away from low-quality projects The number of project sales launches continued to rise in the 2Q 2014 despite a lowering trend of take-up rate. The number of unsold inventory along with the slow sales velocity of newly launched low-quality projects outweighed the strong sales performance of international standard developments.

Meanwhile, the lack of clarity in regards to a new condominium mean that some buyers remain cautious. However, investment alternatives particularly with well-planned and better-quality projects, despite being located on granted or leasehold land, are likewise being considered. However, expatriate rental demand will still remain underserved going forward as the majority of these projects launched are geared towards larger sized units.

Forecast Direction

2Q 2014 – 2Q 2015

New Supply

Take Up Rate

Selling Price

2 Research & Forecast Report | 2Q 2014 | Yangon | Condominium Market

1H 2014 units launched exceeds the whole of 2013The condominium market continually witnessed high number of sales launches as developers expect growth in residential demand. In the second quarter, some 912 units were introduced, collectively from 10 new projects. The sum of units launched in the 1H 2014 reached over 2,500, now exceeding 2013 figures.

With high volume and large-scale condominium developments set to be introduced in the second half, the total units this year will potentially double from that in 2013.

Some notable projects recently introduced include the 27-storey condominium 68 Residences (United GP Development). Located at the corner of Sayar San Street and Kabaraye Pagoda Road, the USD150 million project will consist mostly of condominium units and over 150 rooms of serviced residences, to be managed by CapitaLand’s The Ascott Limited under the Somerset Brand. In a nearby location is a future high-end condominium, the Infinity, by a new property developer, KHG Development Co., Ltd. Both projects are located in freehold land plots - a major buyer’s consideration amid the lack of clarity in the impending condominium law. Meanwhile, other sizeable projects comprising of relatively high number of units are Grand Myakanthar Condominium by Ta Gaung Bwar Co., Ltd in Hlaing Township, and Paw San Hmwe Residences by Mya Thet Tin Construction Co., Ltd in Thuwanna Township. Both projects have initially launched two towers each.

With sales launches increasing remarkably over the least two years, projections on residential building completions are to expand substantially going forward. By end of this year, Yangon’s total stock of completed notable condominium projects, as tracked by Colliers, will collectively reach a new record high of 2,689 units, or a projected additional supply of 1,132 units – more than twice than that in 2013. The development will be more evident as large-scale residential projects such as Thanlyin Star City (YHI & SPA), Golden City (Golden Land), Dagon City 1 (Marga Landmark), Capital City (Capital Development Ltd), Time City (Crown Advanced Construction), and HAGL Myanmar Centre, fully complete within the next five years.

Low-quality projects drag overall take-up rate While demand drivers are strong, the overall sales performance is less optimistic. The city wide-average take up rate continued to dwindle over the last three quarters to end at 68% in 2Q 2014. The number is 5% and 12% lower than in 1Q 2014 and 4Q 2013, respectively. At present, the total unsold inventory from all pre-selling projects is over 2,850 units, up by over 650 units QoQ.

The drop in take-up rate was mainly caused by the weak sales velocity in the Outer City zone particularly across projects located in less commercially developed areas. The zone previously had the highest take-up due to the strong sales performance of Thanlyin Star City which reportedly is 80% sold. On the other hand, with limited sales launches, demand picked up in Downtown Yangon to increase by 7% QoQ. Similarly, the average take-up rate in the Inner City area improved modestly by 2% QoQ, recovering from its drop in 1Q 2014.

Source: Colliers International Myanmar

Cumulative Launched Condominium Units

3 Research & Forecast Report | 2Q 2014 | Yangon | Condominium Market

Unit Mix of Condominium Projects Launched in 2Q 2014

Average Selling Price of Launched Units In 2Q 2014 by Market Segment

Source: Colliers International Myanmar

Colliers projections remained on track with better-quality and international standard projects gaining high sales take-up. However, the number of unsold inventories from low-quality projects continued to expand, magnified with the sizeable number of projects, of similar standards, launched in the last six months. This outweighed the improvement in the overall take-up rate expected for the quarter. The drop in the rate was similarly worsened with the fairly slow sales take-up of stand-alone projects located in leasehold properties. Due to the uncertainty governing land ownership and the lack of clarity of the condominium law, end-user buyers remain generally cautious. However, other well-planned and good-quality developments, despite being built in leasehold plots, remain a major investment alternative instead. But the rental potential for the growing number of expatriates remains unsupported by these future supply as the general unit mix remains geared towards more than one-bedroom. A meager share of one-bedroom units were launched in the 2Q 2014, even lower than the numbers launched in the first quarter.

Pre-selling Condominium Take-up Rate

Source: Colliers International Myanmar

More than a third of the units launched in 2Q 2014 are classified as high-end developments which averaged at USD 3,951 per sq m. The majority of the projects launched in the Outer city zone are within the mid to upper-mid market level selling at an average of USD 1,870 and USD 2,313 per sq m, respectively. A single project fall under the luxury segment with an average selling price of USD 5,400 per sq m - translates to a total price USD 583,200 for a two-bedroom unit. This price on a per sq m basis increased by 12.5% YoY.

Source: Colliers International Myanmar

Karlo PobreResearch Manager Research & Advisory+95 (0) 931 336 099karlo.pobre@colliers.com

Theint Theint ThwinResearcher Research & Advisory+95 (0) 950 267 22theint.thwin@colliers.com

Tony PiconManaging Director | Myanmar+95 (0) 942 103 4026antony.picon@colliers.com

Copyright © 2014 Colliers International.

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

Colliers International Myanmar Unit 7/C (6th Floor) White Cloud Building, No. (138/142) Thein Phyu Road, Botahtaung Township Yangon Myanmar TEL +95 (0) 931 491 678

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