There is much going for Cambodia now; all factors point to more demand for property in the years leading up to 2030
If you had travelled to Phnom Penh recently, the ride from the airport along the Russian Boulevard to the city center would have clearly suggested that the country is finally developing – 20 odd years late.
Brand new car showrooms with the latest models from Porsche, BMW, Jaguar and even Rolls Royce greet you along with the sight of traffic jams more commonly seen in Bangkok or Manila.
The next thing you would have noticed is the on-going development of commercial and residential buildings.
As the condominium market is thriving in Phnom Penh right now, increased demand from local and international buyers has pressured developers to supply better quality condominiums to feed the booming market.
According to a recent study from the World Trust Estate, a real estate firm in Phnom Penh, land prices in Phnom Penh increased between 10 – 30% in the first quarter of 2015 alone, depending on the zoning usage of the area. The highest increase was in commercial areas that are bustling with economic activities.
The most popular and robust locations remain in the Central Business District area where land prices in the districts of Chamkarmon, Daun Penh, Prampi Makara and Tuol Kork have gone up by 20% in commercial areas; and 30% in residential areas in the 2nd to the 3rd quarter of 2014, according to a study by Bonna Realty Group.
Recent launches by real estate developers like Oxley-Worldbridge and SGPD Development Co Ltd have seen take-up rates of 70 – 90% of their projects. The buyers are mainly from Taiwan, Japan, Singapore, Malaysia and China as well as the local Cambodian middle-class.
At The Skyline by SGPD Development Co Ltd, for example, a 1-bedroom unit cost about USD143,000 (USD242 psf ) with a built-up size of 55 sqm. This compares favourably to other freehold properties in the CBD areas of cities such as Bangkok (typical cost around USD500 – USD600 psf ) or Singapore (typical cost upwards of USD1,500 psf ).
Let’s take a look at the ‘5 Reasons Why You Should Invest in Cambodian property now’:
✔ 100% Foreigner Ownership
Since the passing of the bill on the Foreign Ownership law in 2010, foreigners are allowed to own properties in Cambodia with 100% ownership provided that the property has a strata title and is above ground level. There is a foreign quota of a maximum of 70% for any one apartment building.
✔ Steady Economic Growth
According to data from The World Bank, Cambodia has enjoyed robust growth in its economy, achieving a 7% growth in 2014 and expected to grow by another 7.5% in 2015. The growth is mainly contributed by the thriving garment, construction, finance and real estate sector. Poverty rate continues to fall in this thriving economy.
• Social & Political Stability
After decades of war and civil unrest, reform has clearly taken shape and the country has now transformed into an economical, social and politically stable one under the current leadership of Cambodian Prime Minister Hun Sen – who has led the country as Prime Minister since 1985.
• Availability of Leverage
Cambodia-based banks are offering financing for foreign purchasers. This lowers down the initial outlay, making it even more attractive for foreigners to invest in properties.
• ASEAN Economic Integration
With the ASEAN economic integration expected to start at the end of 2015, the move is expected to further stimulate the Cambodian economy in terms of free flow of goods/labour and attracting FDI/ foreign businesses into the country.
FREQUENTLY ASKED QUESTIONS
Cambodia is still an under-developed country. Is there enough demand for real estate?
The Cambodian population is expected to grow by another 4 million to 18 million by 2030. The growth would mainly be in the major cities like Phnom Penh and Siem Reap. Current estimates point to the need of an additional supply of 1.1 mil housing. That would mean 73,000 new homes have to be built every year from now till 2030.
What’s the investment potential in Cambodia compared to other Southeast Asian countries?
Cambodia is one of the last frontier markets along with Laos and Myanmar. It is probably 10 years behind Vietnam in terms of development and 20 years behind Bangkok. Considering the growth witnessed by those 2 countries, the upside potential for Cambodia is immense.
What is also encouraging is that the Cambodian government acknowledges the need for foreign direct investments and has taken concrete steps to change the laws to make it more investor-friendly.
This is crucial as Cambodia moves away from low-skilled labour intensive industries to semi-skilled and manufacturing-based industries such as food processing industries, and electrical and electronic component assembly; industries that create better paying jobs for the people and keeping the country’s progress on track, albeit 20 years late.
Going forward, how far the Cambodian economy can continue to grow and outperform other countries in the region depends on the sustainability of the improvements already seen. Having survived genocide and civil-war in the past, we don’t see why we shouldn’t bet on Cambodia to overcome the odds again.
Young Tan is the founder of www.InvestPhnomPenh.com, a leading investment portal focused on the overlooked frontier market of Cambodia. He is also a Licensed Real Estate Salesperson with SG Condo Pte Ltd (Accredited by the Council of Estate Agencies in Singapore).