Patience, logistics and law in Yangon

 Why fortune will favour the brave in Asia's final real estate frontier

Following three years of constant chatter and speculation about Myanmar being the final frontier in Asian real estate, I finally made it to Yangon this week to attend the second Real Estate and Urban Build Platform conference.

There was plenty of talk at the two-day conference about the potential of property investment in Yangon and elsewhere, although it is clear there is still a long way to go for foreign investors. The key presentation on day one was from a member of the government on the new condominium law—until this is passed, there is literally no way for foreigners to legally own property in the country.

The Ministry of Construction representative who gave the presentation was admirably open to suggestions from the delegates on fine-tuning the bill, primarily inspired by the Singapore condo law, but this would suggest it is still some way off and the chance of anything emerging this year is rather remote.

One key aspect of the bill will be the restrictions on foreigners buying anything below the fifth floor. Whilst this seem perplexing to some, my host in the country, Brett Miller, managing director of Scipio Services, reckoned it was to prevent locals from being pushed out of Yangon's many low-rise properties should a boom come to town.

Years ago, Phnom Penh was considered to be the next gold rush town for ASEAN property. Yet this never really materialised; primarily due to the lack of strong economic fundamentals, foreign interest and enough locals with cash to transform Cambodia from an aid-dependant economy. Whilst superficially similar to the Cambodian capital with its downtown colonial relics (it will be interesting to see if all the talk of renovation rather than replacement comes to pass in the former British colony), Yangon is a completely different proposition.  There's plenty of cash around, although most of it is currently in the hands of a tiny minority, and the massive demand has already pushed rents and land prices up to astronomical levels.

Miller and Scipio are currently renovating the York Centre—a 70s block, which previously acted as the headquarters of Daewoo—into a contemporary space with 100 sqm offices going for a minimum of USD3,500 per month. With many multinationals currently camping out in dilapidated condo units, demand will inevitably be high for such office space.  Unlike Phnom Penh, and other frontier markets, it takes more than a pocket full of cash and a sharp suit to get into Myanmar's real estate industry. It would appear that a keen understanding of the finer points of logistics is essential.

The soon to be completed York Centre

Brett and his partners worked together previously in security in East Timor, while his facility management guy is an ex-marine, fresh from running logistics and supply chains in Camp Leatherneck in Afghanistan. They are all young, smart, enthusiastic and extremely patient.  Yangon is not the wild east and the mantra of anything goes and anything can be bought at a price does not play well here. Try buying property through a proxy and you'll most likely lose it or certainly be stuck with it indefinitely when the condo law comes in. Building anything, selling anything and servicing anything is a tricky business and requires lots of contacts, planning and patience.  Hence Timor and Afghanistan, rather than Singapore and Hong Kong, are better places to cut your teeth if you want to get into business in Myanmar.

In Miller's case, as a US citizen, it also means not doing business with the hundred or so ex-generals and drug lords that are still on the US sanction list, several of whom have now moved into real estate. If he does, he'll risk going to prison back home. Small details like that probably help to keep the focus on playing by the rules.

Things happen fast in Southeast Asia. Desirable areas emerge almost overnight and entire neighbourhoods can be transformed. Take Bangkok's hippest neighbourhood, Thong Lor. Ten years ago it was on nobody's radar, but is now one of the city's most sophisticated drinking and dining spots. Areas of Yangon are sure to undergo similar transformations and those, like Miller and his partners, who were willing to take the plunge, are clearly on the cusp of something big.

Fortune will definitely favour the brave in Myanmar.

http://www.information.myanmaronlinecentre.com/patience-logistics-and-law-in-yangon/