But one analyst says the industry is headed for a worse slowdown next year as construction projects go bust and the global economic crisis deepens
Photo by: Heng Chivoan
A 'for sale' sign in Phnom Penh. Experts say a foreign aid boost may boost property values.
THE nearly US$1 billion in foreign aid pledged to Cambodia by donor nations last week could boost the country's sagging real estate market as early as 2010, economists and brokers told the Post.
Kang Chandararot, president of the Cambodia Institute for Development Study, said he expected the real estate market will rebound in two years, largely on the strength of foreign aid.
"If the government uses the aid to develop the country ... then I think real estate may begin to stabilise," he said.
But he cautioned that aid would not boost prices to the unprecedented levels seen last year.
Local real estate peaked in 2007 and 2008, partly driven by Korean investment. The market started to drop in September, although low transaction volume and scant figures make the depth and impact difficult to assess.
Kang Chandararot said foreign investment would be key to rebuilding the sector, but that other factors - the global economic crisis and border tensions with Thailand - could remain obstacles to growth.
Hang Choun Naron, secretary general for the Ministry of Economy and Finance, agreed that the sector was poised to recover. "I [think] the real estate market will return to normal within the next two or three years," he said. He also blamed global market turmoil and a slowdown in Cambodia's construction sector for the sluggishness.
Two years ago, [INVESTORS] were GUNG-HO, now they're retreating.
"We will face a long-term recovery of the real estate market, but the current standstill won't affect the economy because the government has limited bank lending for real estate projects," he said.
Cambodia allows commercial banks to allocate a total of only $2.5 billion each year for real estate lending, he said.
Sung Bonna, president and CEO of Bonna Realty, said the growing gap between buyers and sellers has cut growth.
He said five to 10 percent of potential buyers are looking for land, while between 90 and 95 percent of sellers are feeling pressure to sell quickly.
"I don't see [many] people starting to look for land, but there are many trying to sell off land in a hurry," he said.
Meas Tola, managing director of Angkor Real Estate of Cambodia, expected a recovery in 18 to 20 months.
"Many businesspeople who regularly invest in real estate have decided to keep hold of their money."
A tough year ahead
But Naim Khan-Turk, the director of research and consultancy with CB Richard Ellis, said that the aid would have little impact on real estate.
"Unless the government is bailing out companies to re-start construction, I can't see it having a huge impact. Most of the construction firms are foreign, and why would the Cambodian government bail out foreign companies?"
Naim Khan-Turk expected 2009 and 2010 would be tough years for real estate. "Everyone is going to be hit. We will see delays in construction ... two years ago, [investors] were gung-ho, now they're retreating to their rabbit warrens."
ADDITIONAL REPORTING BY GEORGE MCLEOD