Cambodia’s property market a new frontier hot spot for investors

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Cambodia has one of the highest GDP growth rates in Southeast Asia Picture: Arno Maierbrugger
Cambodia has one of the highest GDP growth rates in Southeast Asia. Picture: Arno Maierbrugger

Fueled by one of the currently fastest GDP growth rates in Southeast Asia, the Cambodian real estate sector has become the next hot frontier market in the region after Myanmar, experiencing a surge of interest in residential property with a number of new condo developments underway.

Influx of foreign businesses and expats into the country is the main driver for the sector, but they are increasingly being accompanied by local buyers from a growing middle class whose rising salaries allow them to pay off instalments for newly built apartments in the capital Phnom Penh where most of the real estate activity takes place, together with Siem Reap and Sihanoukville.

According to local real estate firms, supply is hardly keeping up with demand. A report by the Cambodia branch of property firm Century 21 found that by the end of last year, 13 condo projects in the city of Phnom Penh with about 3,000 units were completed and the sell-out rate was at an average of 70 per cent and growing. With a number of other premium condo projects in the pipeline by developers mainly from Singapore, Hong Kong, Taiwan, Japan and China, by 2018, the total supply of new condos should reach 10,000, the report said, which will double the average growth rate of condominium supply in the city from 20 per cent between 2008 and 2014 to 40 per cent between 2015 and 2018.

A growing number of new condominium developments sprout up in Phnom Penh, attracting mainly foreign buyers. Picture: Arno Maierbrugger
A growing number of new condominium developments sprout up in Phnom Penh, attracting mainly foreign buyers. Picture: Arno Maierbrugger

According to Kevin Goos, CEO of Century 21 Cambodia, the real estate market in the country is comparable to Thailand’s some 20 years ago, which at that time was predominantly driven by foreign buyers and expats. Currently, the international community in Cambodia accounts for 80 per cent of new condo buyers, but this relation is expected to reverse in the coming five years, Goos says, with buying activity of affluent locals rising sharply.

That Cambodia is turning into a new darling for foreign real estate buyers (and, however, speculators too) has to do with a law passed in 2010 that – for the first time – permits foreigners to own units. Since then, many investors recorded capital gains in excess of five per cent per annum and in excess of six per cent per annum on rental yields last year, data from real estate company CBRE Cambodia reveals.

At present, the average asking price per square meter for a new condo in Phnom Penh is $1,900, less than half of the average asking price in central Bangkok. Basic condos can even be had for $1,100 per square meter, the current minimum asking price, depending on location and facilities (or lack thereof). The highest prices in the current market have spiked to $3,300 per square meter in luxury developments such as The Bridge, De Castle Royal and Casa Meridian, prime projects in Phnom Penh all currently under construction.

Construction sites can be seen all across Phnom Penh. Picture: Arno Maierbrugger
Construction sites can be seen all over Phnom Penh. Picture: Arno Maierbrugger

In a nutshell, new condos in Phnom Penh now have a price range between $21,000 for a small studio in budget condo projects such as Borey 999, developed by a local firm, while the most expensive condos are priced at around $1 million in projects such as The Bridge, developed by Singapore-based Oxley International. In between, there is a broad range of sizes and prices.

However, investors should also be aware that Cambodia’s property market is still largely unregulated and quite informal and most condo projects depend on pre-sales and off-plan sales for funding. These issues, together with a fragile legal framework and a not very reliable land register system, are the main hazards on this market where it is advisable to enter business relations only with reputed developers.

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Reading Time: 2 minutes

Cambodia has one of the highest GDP growth rates in Southeast Asia. Picture: Arno Maierbrugger

Fueled by one of the currently fastest GDP growth rates in Southeast Asia, the Cambodian real estate sector has become the next hot frontier market in the region after Myanmar, experiencing a surge of interest in residential property with a number of new condo developments underway.

Reading Time: 2 minutes

Cambodia has one of the highest GDP growth rates in Southeast Asia Picture: Arno Maierbrugger
Cambodia has one of the highest GDP growth rates in Southeast Asia. Picture: Arno Maierbrugger

Fueled by one of the currently fastest GDP growth rates in Southeast Asia, the Cambodian real estate sector has become the next hot frontier market in the region after Myanmar, experiencing a surge of interest in residential property with a number of new condo developments underway.

Influx of foreign businesses and expats into the country is the main driver for the sector, but they are increasingly being accompanied by local buyers from a growing middle class whose rising salaries allow them to pay off instalments for newly built apartments in the capital Phnom Penh where most of the real estate activity takes place, together with Siem Reap and Sihanoukville.

According to local real estate firms, supply is hardly keeping up with demand. A report by the Cambodia branch of property firm Century 21 found that by the end of last year, 13 condo projects in the city of Phnom Penh with about 3,000 units were completed and the sell-out rate was at an average of 70 per cent and growing. With a number of other premium condo projects in the pipeline by developers mainly from Singapore, Hong Kong, Taiwan, Japan and China, by 2018, the total supply of new condos should reach 10,000, the report said, which will double the average growth rate of condominium supply in the city from 20 per cent between 2008 and 2014 to 40 per cent between 2015 and 2018.

A growing number of new condominium developments sprout up in Phnom Penh, attracting mainly foreign buyers. Picture: Arno Maierbrugger
A growing number of new condominium developments sprout up in Phnom Penh, attracting mainly foreign buyers. Picture: Arno Maierbrugger

According to Kevin Goos, CEO of Century 21 Cambodia, the real estate market in the country is comparable to Thailand’s some 20 years ago, which at that time was predominantly driven by foreign buyers and expats. Currently, the international community in Cambodia accounts for 80 per cent of new condo buyers, but this relation is expected to reverse in the coming five years, Goos says, with buying activity of affluent locals rising sharply.

That Cambodia is turning into a new darling for foreign real estate buyers (and, however, speculators too) has to do with a law passed in 2010 that – for the first time – permits foreigners to own units. Since then, many investors recorded capital gains in excess of five per cent per annum and in excess of six per cent per annum on rental yields last year, data from real estate company CBRE Cambodia reveals.

At present, the average asking price per square meter for a new condo in Phnom Penh is $1,900, less than half of the average asking price in central Bangkok. Basic condos can even be had for $1,100 per square meter, the current minimum asking price, depending on location and facilities (or lack thereof). The highest prices in the current market have spiked to $3,300 per square meter in luxury developments such as The Bridge, De Castle Royal and Casa Meridian, prime projects in Phnom Penh all currently under construction.

Construction sites can be seen all across Phnom Penh. Picture: Arno Maierbrugger
Construction sites can be seen all over Phnom Penh. Picture: Arno Maierbrugger

In a nutshell, new condos in Phnom Penh now have a price range between $21,000 for a small studio in budget condo projects such as Borey 999, developed by a local firm, while the most expensive condos are priced at around $1 million in projects such as The Bridge, developed by Singapore-based Oxley International. In between, there is a broad range of sizes and prices.

However, investors should also be aware that Cambodia’s property market is still largely unregulated and quite informal and most condo projects depend on pre-sales and off-plan sales for funding. These issues, together with a fragile legal framework and a not very reliable land register system, are the main hazards on this market where it is advisable to enter business relations only with reputed developers.

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