Myanmar may find property bubble a key challenge

High-end property prices in Mandalay, Yangon soaring

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Myanmar may find property bubble a key challenge

High-end property prices in Mandalay, Yangon soaring

Lee U-wen
01 June 2012

While Myanmar has been presented as a new frontier for business and investment, one big challenge its government will have to deal with is when bubbles start to form and property prices begin to soar.

This was the view of Stuart Allsopp, the head of Asia Country Risk & Financial markets at Business Monitor International, in an interview with BT at the inaugural Myanmar Summit yesterday.

The day-long event, held at the Marina Mandarin Hotel, was attended by about 65 business and legal executives eager to find out more about a country that was largely isolated from the rest of the world for decades until its new government began sweeping reforms last year.

“We are already starting to see high-end property prices in Yangon and Mandalay, which have become very expensive as more people start to flood in,” said Mr Allsopp. “There could be a number of economic hiccups along the way such as these, just because there is so much interest happening all at once in Myanmar.”

Hotel room rates have also spiked in recent months as tourists flock to various cities in the country, particularly since the United States and the European Union announced a suspension of sanctions in response to the reform efforts.

“The tourism sector is severely under-capacity at the moment,” said Alistair Cook, a visiting research fellow of the National University of Singapore’s East Asian Institute.

“If you look at hotel room rates in Yangon today, a high-end hotel used to charge about US$60 a night but it has since gone up to US$360 a night,” he said.

Dr Cook shared how it will take some time for modernisation to set in and that investors should rely on a strong local partner before taking the plunge into Myanmar.

He shared an anecdote of how a Western investor recently travelled to Yangon looking to buy a plot of land to start a business. He could find neither the government office nor a qualified person to help him with his requests.

“You can’t go there on a weekend shopping spree to invest your money. You’ve still got to rely on networks there, which takes a lot longer to build up,” said Dr Cook. “There are certainly the opportunities there, and immediate ones, but you won’t be able to get things done without a good local network.”

Myanmar is set to host a number of major events in the coming years, in particular the South-east Asian Games in 2013 and then assuming the chair of the Association of South-east Asian Nations in 2014.

But while there have been many significant political changes to date, Dr Cook said that things had yet to reach the tipping point.

“We are talking about a country that has gone through a long period of isolation and is now opening up. While there are great opportunities at the moment, the sustainability of the current process of reform is still questionable but the outlook remains positive,” he said.

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