With Asian and Western markets in turmoil, experts say Cambodia's real estate boom could be over and a recession looming on the horizon

Photo by: Tracey Shelton

Local realtors are urging the government to take measures to prevent a property collapse.

CAMBODIA'S real estate boom may be coming to an end, with the global financial meltdown threatening foreign investment, officials and business leaders say.

"Our property markets are closely connected with the stock markets in South Korea and other Asian countries. If these markets fall, we are affected," said Kang Chandararot, the head of the economics uat the Cambodia Institute of Development Study.

"We will see a recession in the short term - perhaps in six to 12 months," he said.

South Korea has been especially hard-hit by the crisis, and the won is down 33 percent this year.

The Korean government issued a statement this week urging banks to sell foreign assets to increase liquidity. Korea  is Cambodia's biggest investor and a fall in Korea would be especially harmful to local growth.

"Korean and other Asian markets are very closely connected to the US, and these countries are our biggest investors," said Kang Chandararot.

Cambodia's real estate sector has enjoyed unprecedented growth since 2007, but began to slide in mid-2008, industry sources say.

No figures on the depth of the declines were available, but industry experts said the crisis' impact could be felt soon.

"From a foreign investment perspective, Korea is having a very tough time.... Things may stall," said Naim Khan-Turk, the director of research and consultancy services at CB Richard Ellis in Ho Chi Minh City.

He said that the size and speed of the crisis was unexpected.

We will see a recession in the short term – perhaps in six to 12 months.

"Nobody thought [the crisis] would be this bad.... The only positive factor I can see is the upcoming US presidential election."

"Many of the projects [in Phnom Penh] haven't started construction, so they will probably be stalled as well."

A call for action

Lan Sinnara, deputy director of the Cambodia Estate Agent, a local realtor, and secretary general of the Cambodian National

Valuation Association, said about 100 real estate companies have called for action to strengthen the land sector against further losses this month.

"The real estate industry is very concerned about dropping property values," Lan Sinnara said.

The drop is hardest on  the Thai border, with locals fearing an outbreak of fighting over territory that is disputed between Cambodia and Thailand.

"Land prices have remained stable despite problems along the Thai-Cambodian border, but sales have dropped because agents and businessmen are afraid of working in such a volatile environment," said Mao Pov, deputy chief of the Real Estate Division of the Ministry of Economy and Finance.

As land values drop along the Thai border, areas adjacent to Vietnam have risen over the last few months, Mao Pov said.

But he added that while land values in Phnom Penh have skyrocketed, the national market remains undervalued compared with neighbouring countries.

Cheam Yeap, a lawmaker with the Cambodian People's Party and chairman of the National Banking and Finance Committee, said the US crisis might affect the Kingdom's real estate market, but not the economy as a whole.

He said Cambodia's economy is sufficiently diversified in tourism, agriculture and garment manufacturing to withstand the global crisis.

ADDITIONAL REPORTING BY MAY KUNMAKARA