MYANMA Gone Yi Estate, one of the many high-rise projects to occupy the Yangon skyline in the past year, offers tenants luxury and elegance for a price – apartments start at K50 million. But in Myanmar’s current housing market, that price may be too steep.

“There is an oversupply but property prices are not likely to decrease,” explains U Zaw Myo Tun, manager of Maung Weik and Family Company Ltd and developer of Myanma Gone Yi.

Though the company has been doing reasonably brisk business since the property hit the market in January, future demand in the market may not be sufficient to sustain sales at these prices.

“As we have invested a lot of money on (the project) we cannot decrease the price,” U Zaw Myo Tun told Myanmar Times last week.

The situation is not unique to Myanma Gone Yi. Sources agree that the current drive to develop high-rise buildings in Yangon before 2006 has created a surplus of apartments and, to a lesser extent, offices. The solution, they say, is a dramatic increase in demand.

“The situation in the property market is bad because prices are very high and few people can afford to buy,” says U Than Tin Aung, honourable lecturer at Yangon Technological University. “So there is an oversupply in the market.”

Though many construction companies have sold all apartments on their developments, some have had to drastically cut prices to do so.

“Really, there is no demand in the market,” says U Than Tin Aung.

Among experts, the consensus is that potential consumers are playing it safe, for the moment.

“The property market depends on the spending power of the people,” Dr Khin Shwe, Chairman of the Myanmar Construction Entrepreneurs Association (MCEA), said in the organisation’s annual report published in March. “In our country… people are afraid of spending money the wrong way.”

But Dr Khin Shwe estimated that demand can expand if local business picks up – and that the property market should be ready when it does. As he saw it, the 2000 apartments built by the MCEA prior to the publication of their 2002/2003 report do not begin to match potential demand.

“(Usually) the whole family lives in the same house, even though the son and daughter are married, because of the family business,” he said.

“But when their business is good, they will buy a house and we have to make sure there are enough apartments at that time.”

His position is echoed by U Myint Swe, a deputy director of the Department of Human Settlement and Housing Development.

“High-rises are for middle and upper class people and not for people who don’t already own a home,” says U Myint Swe. “These people are thinking of living better so by the time the projects finish, they will move in.”

Tenants looking for better living will surely be satisfied by the many offerings of the construction boom. Dr Khin Shwe proudly pointed out that he used Singaporean expertise when developing Pyay Garden Condominium. The Singaporean company he used was responsible for, among other things, the design and infrastructure of his apartment building.

“We can get high technology from them. In the coming two or three years, we will have high rise buildings of a better quality than now,” Dr Khin Shwe said.

But extravagance comes at a price, an unfavourable situation when construction costs are high. For many companies, hi-tech luxury has taken a backseat to more urgent concerns. As pressure to build heats up, prices of construction materials have risen as demand has increased.

U Ko Ko Aung, chairman and managing director of World King International Construction and Trading Company Ltd, says that he had to raise his prices as he scrambled to cover expenses.

“As there are a lot of construction (projects), we need a lot of construction materials,” he said. “But… we have had to buy them from outside (abroad) at a high price. As building costs are high, the price of apartments has gone up accordingly.”

The spur to build rapidly has depleted the domestic supply of raw materials used for construction, such as concrete and iron bars. Last month, the Myanmar government granted licences to construction companies to permit imports. But as Myanmar construction companies have sought to purchase materials from countries like China and Thailand where property development is thriving, high prices have put the squeeze on local companies.

While Myanmar money goes overseas, many experts agree more foreign investment is needed to stimulate demand.

“When there is foreign investment, the property market will improve,” explains U Win Htay, chief executive officer of MCEA. He points out that China and Thailand have faced similar problems and that both cases were solved with foreign investment.

“Only a few can afford to live in those buildings,” he says. “It is true that (they) reflect improvement in the country but many people do not want to live in those sorts of buildings.”

Yet some see promise on the increasingly crowded horizon. U Zaw Myo Tun, manager at the Myanma Gone Yi homes, notes that business could pick up.

“I believe that business will improve within two years,” he says. “There will be people who can afford to buy houses.”