This short article tells the tale of housing bubbles that I feel are growing to unsupportable levels here in Myanmar. Since I am writing this in November 2012, it can be interesting to compare with this article from January 2012 where office space in Sakura Tower rented for 50 USD per square meter per month, double from the previous year.
This morning, I had breakfast at Trader’s Hotel with Mr Lauwence, an investor in the hotel business who just arrived from California to visit Myanmar and see if the country is worth investing or not.
As I explained my guest that office space rental in Sakura Tower, just other side of Trader’s Hotel, already hit 80 USD per square meter per month in Yangon, his wife was shocked and said “it is more expensive than in New York”.
Mr Dominique, a long-time French expatriate who is giving advice to companies wanting to establish a presence in Myanmar, has his office at 8th floor of the almost empty CentrePoint Tower, where the monthly rental is 50 USD per square meter. The whole tower is empty except for a few floors, but everything is being renovated waiting for new companies to rent the office at the “cheaper” (compared to Sakura) rate. The new neighbor of Mr Dominique is an investment fund who just signed a 3 year lease for 200 square meters (that means they agree to pay the hefty sum of 360,000 USD over 3 years in a country where 100 USD buys a month of a housemaid’s time).
Kyi Kyi Mya, friend and spiritual grandmother of our family, was contacted by French guy who wants to rent her family house in Tamwe Township for 48 Lakhs per month (4,000 USD per month at current rate). The new occupant will renovate the old building in exchange for reduced rate the first year.
Zu, lady doctor and friend of my wife, lives in the family house on Pyay Road. The house is made of wood and bricks and has seen little renovation since a British architect designed it 70 years ago. The land is worth 1,000,000 USD at “market price” and won’t be sold as long as the grandmother lives. When it is sold (the temptation is big), the future owner is likely to destroy the old house and build another of these McMansions that you see all over Yangon, complete with fake neoclassical columns, garage for 2 SUV, lots of windows but no garden or any space to breathe.
Mr Rajiv came from India two years ago to work for a local business man as Managing Director. He has been living in a standard 4 room condominium in the aging Excel Tower near the crossing of Shwegonedaing and Kaba Aye Pagoda roads. He told my father-in-law that his proprietor wants to hike his rental rate from 8 (1,000 USD) to more than 13 Lakhs (1,600 USD). If his salary does not increase to match the rent increase, what is the point of working hard if everything is pocketed by renters (who don’t even pay tax)? At least with State taxation a part of the money will be used to pay teachers, improve roads and build hospitals and not to speculate on real estate.
I didn’t explain it yet but in Myanmar condominium rentals are paid 1 year in advance, in cash of course. When I arrived in February 2011 we paid 42 Lakhs (4,200 USD with exchange rate of 1,000 USD per MMK) for the year. When we renewed in February 2012 we paid 48 Lakhs (6,400 USD with exchange rate of 750 USD per MMK). We got a chance to lock the rate by renewing early in August 2012 for 48 Lakhs (5,400 USD at 880 USD per MMK). My wife tell me that the current “market value” of our apartment is now 6 Lakhs per month (72 per year). Unless the local currency evaluates to match the inflation we are not going to be able to follow at the next renewal.
My wife explained me that proprietors of serviced apartments prefer to rent to long-term tourist or businessmen who find hotel accommodation to be too expensive now (3 digit prices), and that increases the pressure on existing rents. Our choices will either to pay the increased rent, to downgrade to an apartment (smaller and without electrical lift), or to think about relocating to another country where highly qualified professionals are actually paid for their work.
With the normal people salaries stagnating and all this foreign money entering the country, I don’t know what will happen next. Will there be inflation of local prices (as the production of goods does not match the increase of money supply) or will there be devaluation versus other currencies (I yet have to find industrial products sold here that are “Made in Myanmar”)? Myanmar is a mystery to me, why so much money in so few hands when the country produces nothing but natural gas, raw timber and unrefined agricultural products?
Myanmar Government should be careful on these issues and stop the bubbles by taxing all these unproductive uses of money. Not only the burden of rent is starting to make impossible to earn a living in this country, but it also encourages us qualified workers (Myanmar nationals who are still there, just returned from abroad or were adopted like your bamar-yu) to consider leaving for more reasonable countries in ASEAN such as Malaysia or Thailand.
Will the unregulated greed of renters kill the Myanmar economic Miracle just after take off?