There are few “untouched” places on the globe. A few spots in the Brazilian rainforest, perhaps Canada’s far north and the vast central spaces of Russia and China — none conducive to a relaxing holiday. Long touted as the next big thing in travel, Myanmar — or Burma depending on when you learnt your geography — has been attracting travellers for a few years now. The government has decided tourism would be the country’s next focus in an economy currently dominated by natural resources and agriculture.
But Myanmar has its work cut out for it. Military rule since 1962, charges of rigid censorship, elimination of personal freedoms and rampant human rights abuses (including genocide and child labour), lack of solid infrastructure and a poorly educated workforce stemming from years of forced isolation are some of the hurdles. Investment sanctions are still in force by many countries and though tourism is being encouraged, interaction with tourists is allegedly strictly controlled.
Despite all this, institutional investors are high on Myanmar. The military government has been very publicly loosening its control in recent years, the icing on the PR cake being the 2011 release of Nobel-winning activist Aung San Suu Kyi. The GDP is estimated to be growing at 5.5 percent each year, and heavy hitters China and India are active investors. The current capital at Naypyidaw is one of the world’s fastest growing cities, but Yangon (Rangoon) remains its beating heart.
“Undoubtedly, Burma is undergoing a profound transformation. The government is pushing reforms to open up the country and attract investments, such as easing restrictions on foreign ownership of ventures in certain sectors,” begins IP Global CEO Tim Murphy. In 2012 a new law was tabled that eliminated the need for foreign nationals to have a local partner for starting businesses and a new condominium law that allows for foreign strata title ownership (modelled on Singapore and Thailand’s) is expected to pass within six months. But it still leaves a chasm between Myanmar’s investment opportunities and its neighbours’, which have fewer political and financial issues, the foundation of strong investment. “From our perspective it is too early [for Myanmar] to be qualified as an investment destination … There are still a lot of uncertainties given the violence, political chaos and fledgling banking system in the country,” Murphy cautions.
The inability to purchase land or property definitely makes investment tricky for overseas buyers. But independent investment has opened the floodgates for hotel groups, some of which has to do with China and India. “Myanmar is emerging from 50 years of isolation and the economy is opening up,” notes Phyo May Win, communications manager for Traders Hotel, Yangon (a Shangri-La brand). “Myanmar is experiencing demand for all levels of hotels, two- through to five-star.” Jones Lang LaSalle predicts Yangon’s international hotel supply will grow 37 percent over the next four years; reported room rates rose 350 percent between 2007 and 2012.
Myanmar and Yangon’s development will be a market driven cycle that should mirror the ones in Thailand and Vietnam. “The initial wave will be in hospitality, an increase in focus on the four and five-stars,” theorises JLL Thailand and Indochina Senior Vice President Andrew Langdon. “Also, in the initial stage, what’s happening now, will be [activity] in the serviced apartment sector. That’s severely undersupplied. There are four or five right now and they are 100 percent full.”
“Yangon currently has a shortage of full service apartments and internationally branded hotel rooms,” agrees Win. Shangri-La is opening a hotel in ’16 after its Residence & Resort Yangon this year. A 2012 Colliers International market report noted only one serviced apartment in the city core, which posted record occupancy (by oil and gas workers), rising rates (5 to 7 percent over 2011) and high condominium demand and take-up rates (85 percent).
Condominiums are popular now precisely because of that dearth of serviced residences and substandard local housing. Condo properties can be picked up for US$250,000 and yields are strong — in excess of 10 percent. “As an investment right now? Yes, it’s a good buy,” Langdon states. The lack of serviced housing is forcing expats into villas and houses where prices are skyrocketing. “A typical three-bedroom villa is up to US$15,000 per month and — it gets better — owners are demanding one year up front. And they’re getting it,” Langdon points out. But banks are getting ready to alter their lending policies for local residential sales, currently all cash, “which will underpin the development of the residential market there.”
So are resort developments next? “In a nutshell it is too soon. International visitors don’t go to Myanmar to go to the beach. Most do one or two weeks and see Yangon, Bagan, Mandalay and Inle Lake,” says Langdon. Resort development will lag with Phuket and Koh Samui nearby, but Myanmar’s 2,000 kilometres of coast and 100 islands are catnip. “Potential for the resort market there is huge.” Key word: potential.