Housing demand driven up by Myanmar's growing population

At least 330,000 people move to Yangon every year from Mayanmar’s rural heartlands or its townships in the hope of finding work. The city’s population is expected to reach nearly 10m by 2035, almost double the number registered in 2013.

Housing Shortage

This trend has prompted a housing shortage in the city that has pushed rents to the levels of Myanmar’s most prosperous neighbours. Many newcomers find themselves living in slums or small, poorly-maintained apartment blocks. Even families that have lived in the city for many years are often housed in colonial-era buildings, sub-divided into apartments without basic amenities.

The Department of Urban and Housing Development, which is part of the Ministry of Construction, estimates that around 1.8m people are in need of low-cost housing and acknowledges that the government has been unable to meet the growing demand for affordable homes. It is currently working to establish a housing policy, development strategy and affordable housing programme.

Land Issues

Although the government has made low-cost housing a priority, given existing problems with land and financing, both for developers and the potential buyers, it is struggling to deliver on its commitment. Despite commissioning several housing projects in the city, demand far outweighs supply, with homes awarded through a lottery, which, according to the media, is hugely oversubscribed.

For developers, the first issue is the land itself. Gaining access to and buying land for development is difficult, given the high prices involved. A study on urban development in Yangon, by the Japan International Cooperation Agency and the Yangon authorities, found that in 2012 agricultural land occupied approximately 51% of the city’s total area, while urbanized areas covered just 31%.

The availability of land issue is compounded by the fact that ownership remains opaque – increasing the risk of disputes. A new land use policy aimed at increasing transparency remains under discussion.

Low Returns

In terms of building costs, it is hard for developers to keep down prices for low-cost apartments, according to U Kyaw Kyaw Soe, managing director of System Engineering, in conversation with the press. U Kyaw Kyaw Soe estimates it costs developers about MMK20,000 ($18) per sq foot to build an affordable apartment – a figure which does not include the cost of the land or infrastructure. Since the likely return on affordable housing is far lower than for luxury apartments, there is little incentive for developers to build lower-cost units. Myanmar’s under-developed financial system also acts as a deterrent, making it difficult for contractors to secure the capital that would enable them to build.

Satellite Towns

The Yangon City Development Committee (YCDC) is focusing its attention on the development of new satellite towns, which will include affordable homes both for purchase and rent. Two of the new townships, including Dagon Seikkan, which is being developed in partnership with Singapore’s Surbana, have been designated as pilot projects for the provision of affordable housing in the city. Just over 10,000 units were planned for completion in 2015. Surbana, leveraging on its experience developing Singapore’s public housing, is also working with Myanmar officials on a master plan for expanding affordable housing across the country.

The government has indicated that it is willing to allocate land specifically for affordable housing and to cooperate more closely with private developers – whether local or foreign - on such schemes. Indeed, government support will be vital in terms of housing provision given the current environment. As home financing does not really exist in Myanmar in a format that is accessible to the majority, and as more people arrive in the city, the pressure on the government to provide affordable accommodation can only increase.

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The Report: Myanmar 2016

Construction & Real Estate chapter from The Report: Myanmar 2016

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