Property bubble may burst soon, economists warn

Economists are becoming increasing alarmed by rising speculation in real estate, saying it will undermine the economic progress Myanmar is making, while a former chairman of the Myanmar Securities Exchange Centre says the property market is in a bubble and it will burst soon.

“Land prices are likely to rise in this time of economic transition. It will stop itself when the time comes,” said Soe Thein, a former chairman of the Myanmar Securities Exchange Centre. He compared the situation in Myanmar now to bubbles that burst in Thailand and Vietnam, the former in 1997 and the latter several years later.

“This will happen in Myanmar too,” he said. “We just don’t know when.”

Pyae Wa Htun, CEO of Parami Energy Group, agreed that property prices would continue to surge due to rising demand. “But there is no doubt the market will fall when the owners of prime land start selling at prices that undercut the market,” he said.

Some people are borrowing cash to speculate in the hope that the sale price will cover the interest rates accumulating on their loans. “If the property market falls, the entire economy will be damaged at once. Of course those with black money won’t be hurt,” Pyae Wa Htun added.    

Soe Thein said the emergence of a capital market in 2015 would prevent speculation in property by providing an alternative channel for investment. “It’ll take at least four to five years for investment in the stock exchange to accelerate,” he said. “The stock market won’t be able to help reduce land prices in this period, and I think the balloon will burst before its time as current activities seem to have gone beyond the line,” Soe Thein added.

There is plenty of talk that Japanese developers are driving up property prices, but no reliable data backs this up.  

Soe Thein said the current situation was beyond the government’s control. “It cannot handle the situation in its entirety … only a competitive market can bring down high prices,” he explained, using the example of the decline in the prices of SIM cards as an example.

“The balloon can burst for at least five reasons. One of them is the increase in the number of brokers. The real-estate business should be in hands of professionals, but now many people have gone into this business. This leads to an overwhelming supply that outweighs demand. The market is cooled and is likely to collapse soon,” he said.

Surging property prices do not benefit the middle class, but provide a speculative boost to tycoons and brokers, he said.

The government needs a master plan to determine how much farmland can be converted for development, experts have said. They point to studies showing the population of Myanmar topping 100 million by 2040, and say this underscores the need to consider land-use policy very carefully.  

The current government’s policies have been roundly criticised.

A former director of the Human Settlement and Housing Development Department said a forward-looking approach is necessary. The government is reforming old policies rather than developing new ones, the official said, asking specifically why the Ministry of Home Affairs continues to oversee land.

Recent history has seen prices of automobiles, SIM cards and property surge. Two have already collapsed, the official noted.