DVB Interview International spoke to Tony Picon, the managing director of commercial real estate firm Colliers International in Burma, about the state of the country’s property market while requesting advice for foreign companies and investors who are thinking of making the move into Burma.
Picon said that foreigners who are interested in coming to Burma should realise that they would be operating in a frontier market.
“Myanmar [Burma] has opened up to a very different world,” Picon said. “It’s not going to change overnight. The expectation that we’re going to see Singapore tomorrow in Myanmar or Thailand, Indonesia or Vietnam is very optimistic – so we have to be patient.”
Picon acknowledged that the country has progressed from where it was a few years ago when President Thein Sein came to power.
“The country is moving – it’s moved incredibly far from where it began. But it’s still not good enough for a lot of people and investors. And they have to be careful and patient with the way the country is opening up and allow Myanmar time to understand the world as it is now,” he said.
Before moving to Burma, Picon said businesses should do their homework about the country and the market they will be operating in.
“Investigate, research, come to the country, visit, talk to as many people as possible, but really look at yourself as a company and say, ‘Are we ready to come to Myanmar?’, ‘What is our experience of frontier markets?’” he said.
One of the main risks of operating in Burma is finding the right joint-venture (JV) partner. Picon said companies should do due diligence on potential partners and they should be aware that sanctions by certain governments are still in place.
“There are plenty of good people to work with,” he said. “But you have to go in with your eyes wide open. You have to check on your due diligence for sanctioned parties.”
Another challenge businesses face is finding skilled labour in the country.
“You’re going to see a need for skilled people in all areas and there is a lack of that skill … But there is a very strong willingness for people to move up quickly.”
To help improve the lack of skilled labour, Picon said companies should do their part in capacity-building.
“[Burma] is trying to attract companies who do that, who create training programmes and better conditions for their employees,” he said.
House prices in Rangoon are comparatively high for a Southeast Asian city, and some property is more expensive than apartments in New York. Picon said it would take a long time for prices to drop.
“There’s no speculative bubble that can burst because there is no bank finance which underpins it,” he said.
Picon said land prices were a different issue as the owners could sit on the land for years without changing the price.
“There are very limited options for people to store their wealth, and so land becomes one of the safest. That really underpins the whole of the property market here,” he said.
There has been very little commercial interaction in the past between foreigners and locals that has allowed the introduction of feasibility studies and valuations on land, Picon said.
“It’s very much the Myanmar from Mars, foreigners from Venus, that they’ve only just collided in the last two years, and beforehand there was hardly any interaction in terms of land. So I can understand why there is this dislocate,” said Picon.
“[If] Myanmar people understood that it’s not foreigners trying to get a cheap cheap cheap deal, it’s not a negotiation tactic, it’s genuine. In order for a project to be feasible, the land price must be reasonable.”