ASEAN KEY DESTINATIONS
Myanmar needs to get land prices under control, investors say
Government measures to control land prices are in great need, or Myanmar may not be able to attract more foreign investment and create as many jobs as projected.
"There's no doubt that there are plenty of opportunities in property development, with supply remaining at very low levels. All the hotels and office buildings in Yangon were built in the 1990s and there has been no new investment in the past decade," Aung Zaw Naing, managing director and chief executive officer of Shwe Taung Group, a leading local developer, said yesterday.
"This is changing after the sudden change in the government, reforms, surge in demand and the Foreign Investment Law amendments," he said.
Serge Pun, executive chairman of another local company, Yoma Strategic Holdings, said the cost of land would be a major hindrance for the Myanmar government in achieving its objectives to draw new investment and create jobs. Assuming that a million jobs will be created by 1,000 factories, employing 1,000 workers each, the factories need land. Driven by speculation, an undeveloped land plot is asking for 450 million kyat (16.3 million baht or US$527,000) against the 1995 price of 3 million.
The government should expropriate private land and give it away for industrial-estate development, he said. Factories should be allowed to operate on the land until the last day. When the businesses fold or are abolished, the land would be returned to the government for reallocation.
"This would reduce speculation. Through this, the government would be making the land a pure employment tool," he said.
The Myanmar government is now refraining from creating conflicts with the people, but this would be a way to support its aim to create jobs, he added.
Tony Picon, associate director of Colliers International, said that in a year, the rent for a Yangon office went up from $65 (2,000 baht) per square metre per month to $150.
Once President Thein Sein endorses the amendments to the Foreign Investment Law, which are opening the door wider for foreign investment, rents could go up even higher. In particular, Yangon, which "has been in business for a long time", would enjoy most of the inflows, not to be challenged by even the capital Naypyidaw.
Siam City Cement also faced this problem. Renting a small apartment for an employee in the middle of last year, the company was asked to pay $1,200 a month, only to face a hike to $3,500 two months later. At that price, foreign tenants may have to live without any leisure facilities like a swimming pool or fitness centre, let alone proper hospitals or international schools.
Picon told The Myanmar Times recently that top-end prices for undeveloped land in prime Yangon locations were reaching $3,000-$4,000 per square metre.
In the country where investment choices are limited, locals save money in the form of gold and property. Sellers take advantage of the lack of land appraisals, and buyers are ready to grasp land in desirable locations, despite awareness of the investment risks associated with the uncertainty in laws and poor infrastructure.
To ease the shortage of hotel rooms, the Myanmar Investment Commission has put historic state-owned buildings in central Yangon up for 30-year leases.
But prices are expected to go up when the amended Foreign Investment Law is approved, as it would allow foreign individuals or companies to lease land also from the private sector for 30 years, with the possibility of two 15-year extensions. Previously, foreigners could only lease from the government.
"It will take at least four years before we see large real-estate developments. Given the improvement in the investment law and increasing land prices, a more serious aspect is how to deal with demand until then. This leaves visitors to pay $600-$700 for a basic hotel room. Without the government's control, we could face problems even with a good investment law," Picon told the Euromoney Conferences.
But as residential and commercial prices are high, Marvin Yeo, co-founder and managing partner, said Myanmar quoted attractive agricultural-land prices, at about $100 per hectare against $1,000 in Indonesia. Most of the 653,520-square-kilometre country also remains undeveloped.
The Yangon property market is now driven mainly by foreign demand, unlike in Thailand, where it is driven by domestic demand, he said.
Peter Ryder, CEO of Indochina Capital, whose focus is on Vietnam now, said the Myanmar government should start on zoning laws for Yangon and key cities now. Plus, for sustainability, local and foreign developers should focus more on developing products for the locals and the environment.
The long-term potential is there, and 100-per-cent foreign ownership would draw in more foreign investment.
"This will attract quality business management to Myanmar," he said.
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