A tale of two cities _ bangkok and yangon face off as AEC 2015 nears
The coming formation of the Asean Economic Community will see a major influx of foreign workers and while the Thai capital's market is thriving, Myanmar's economic hub wins in affordability, if not quality
Southeast Asian countries will become a single economic community in 2015. As people in each of these countries will be able to move around freely and work or live in any other member nation, there will be a direct impact on the property market in the industrial, office, retail and especially residential sectors.
Residential demand is expected to be particularly strong to accommodate an influx of workers, particularly in condominium units. These are the best choice for foreigners as they are safe, have supporting facilities and easy access, maintenance fees are lower than houses and they are most suitable for one or two people. But as 2015 has not yet arrived, property markets in most countries still focus on local buyers, with the exception of Malaysia and Singapore. Myanmar is also becoming very interesting at the moment as foreign investors are looking for opportunities there to either expand existing businesses or start new ones.
The condominium market in Bangkok has become fashionable during the past decade, especially in city areas along the mass-transit lines. Local demand is very strong, with more than 90% of all purchasing power from Bangkok, especially since 2009 because the economic crisis and subsequent weak recovery in Europe and the US have affected foreign investment.
Most condominiums in Bangkok focus on local buyers but there are some luxury properties hoping for foreign buyers, as the unit price is too high for many Thais. The price range considered affordable for local buyers in Bangkok is up to five million baht for a unit sized from 22 to 40 square metres, or between 50,000 to 85,000 baht per sq m for a one-bedroom unit.
Despite the heavy focus on city-centre locations near the BTS and MRT, more than 60% of all condominiums are located in suburban Bangkok away from the mass-transit system, as land prices along these lines have become very high, especially in the past three to four years. Many developers like to keep their selling prices below three million baht to attract local buyers, so locations close to a BTS or MRT station are out of the question. Developers prefer launching new projects on a main road or on roads that can connect to existing or new mass-transit lines.
The average take-up rate of newly launched units in the first half of this year was about 50%, similar to the average at the same time last year. In the first quarter of this year, more than 55% of all newly launched units were sold. Sales dropped a little in the second quarter as developers were waiting for some of the vagueness in the new Bangkok Town Plan to be cleared up. As well, there were some condominium projects unable to start construction despite being completely sold out. The other reason for the slowdown is that there are still many available units on the market, giving buyers more choices and an option to wait for new projects. Condominium projects in suburban Bangkok have been showing a higher take-up rate than in the city area, especially along the new BTS extension line.
It is no longer the administrative capital of Myanmar _ that honour went to the purpose-built city of Nay Pyi Taw in 2006 _ but Yangon is still the country's largest city and its business, financial and industrial hub.
It is also the main destination for the increasing number of foreign investors, consultants and advisers who have been flocking there since the government began its reform programme two years ago.
Most local residents of Yangon live in apartments or condominiums in the city, and only a few on landed property outside the main city area.
The geography of Yangon is similar to Bangkok's as both cities are located astride the country's main river, with growth spreading outward from its banks.
Most condominium projects in Yangon are substandard when compared to those in Bangkok.
They have no supporting facilities, limited car parks and no juristic person for project management.
The definition of a condominium in Yangon is that the building should have a lift; otherwise, it is an apartment.
Local residents have been focusing more on residential condominiums since the devastation of Cyclone Nargis in 2008, as they believe such buildings are safer in a big storm.
As a result, in 2009 there was a significant increase in the condominium market.
The majority of condominium units in Yangon are two- or three-bedroom types ranging from about 90 to 140 sq m _ very big when compared to the Bangkok market. Big units are suitable for families and extended families; many children still live with their parents after getting married, a trend that is dying out in Thailand.
The trendiest location for a condominium in Yangon is the central business district downtown, and in other outer areas that have good access to the CBD.
It is where most office buildings, hotels, serviced apartments, shopping malls, department stores, shops, restaurants and individual offices in Yangon are located.
It has the highest density and the steepest land prices.
People in Yangon travel downtown on public buses along the main road from outside the downtown area.
As unit sizes are very big, a condominium in Yangon may contain only 10 to 100 units. The average price of a condominium unit in Yangon is in a range equivalent to 30,000 to 50,000 baht per sq m, or about three to five million baht for a unit size of 90 to 140 sq m. Prices in the downtown area are the highest.
One interesting fact is that all transactions, whether for condominium buyers or developers, are done in cash as banks in Myanmar do not yet have a mortgage system.
The downtown area has the highest take-up rate with more than 80% of units sold. However, most of the newly launched units in 2011 and 2012 have been outside the downtown area because of cheaper land prices.
Surachet Kongcheep is a senior manager at Colliers International Thailand. He can be reached at email@example.com.
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Writer: Surachet Kongcheep