Some brokers report as much as a 50 percent decline in home puchases amid market turmoil abroad and rising prices at home, but recovery predicted

Photo by: Tracey Shelton

Buildings sit empty near Phnom Penh International Airport. Property dealers hope Cambodia will be insulated from the worst effects of the global slowdown.

AS the subprime mortgage market in the United States continues to fuel a global economic meltdown, Cambodia has seen the first signs of decline in its once thriving commercial and residential property markets, with sales plummeting as much as 50 percent this year, developers say.

Sorm Molika, marketing manager at the New World Group, said sales on apartments and villas this year have dropped 50 percent compared with 2007 - a trend she says began in July, when the government announced new investment guidelines for developers.

"My company has seven housing complexes in Phnom Penh," she told the Post Sunday. "We've sold only 100 units, down from 300 last year."

While sales are down, Sorm Molika says prices have nearly doubled.

Two-storey apartments in Phnom Penh last year sold for about US$66,800. As of July, they sold for $120,000, Sorm Molika said, while twin villas now sell for $170,000 - up from $90,000 last year.

This is a hard time for the whole world in terms of selling property.

Diep Hok Sarun, marketing manager for developer Happiness City, said his company's sales have dropped 30 percent over last year, but that it was a trend the government was working to reverse.

"I believe strongly that sales will rebound as the government continues to seek foreign investment in Cambodia," he said.

He said prices on new homes and villas in Phnom Penh's Russey Keo district have doubled and even tripled in some cases.

"This is a hard time for the whole world in terms of selling property," said Cheng Kheng, managing director for Cambodia Properties Limited (CPL).

But he said if recent economic trends continue, home prices could eventually drop as owners require greater liquidity.

"I think things will improve when we see greater stability in the political and economic sectors," he added.

In Channy, CEO of Acleda Bank, said it was a difficult time to sell property.

"If you want the property market to prosper, the government needs to develop other sectors, such as industry, service and agriculture," he said.

Norng Piseth, deputy director of the Financial Industry Department at the Ministry of Economy and Finance, acknowledged the slowdown in the property market and the government's lack of response to it.

"We think the difficulties in the housing and land markets are global and not specific to Cambodia," he said, adding that market conditions had nothing to do with new regulations governing the way developers fund projects.

In July, the government issued an order stating that developers would be required to obtain additional licensing for projects as well as to deposit at least two percent of their total investment at the National Bank of Cambodia.

Looking out

Mao Pov, deputy chief of the Real Estate Division at the Ministry of Economy and Finance, said the government hopes to mitigate the global meltdown  by attracting foreign investment.

"We are attracting new business and investment from Japan and other countries," he said, adding that Minister of Commerce Cham Prasidh has just returned from Japan, where he sought new investors to come to Cambodia.

Despite property price volatility, Thon Virak, deputy director general of the Foreign Trade Department, said trade and investment have largely remained flat. "Business and investment are off and on as normal," he said.

Keith Ooi Hsien Yu, the country head for the British property management firm Knight Frank, said that he has not yet seen rentals drop.

"I think that the crisis will cause everyone to be cautions, but [the rental market] still seems to be OK," he said.

He said that the office rental market might be less exposed to the financial crisis because of low supply.

"There will be contractions ... but they probably won't be severe unless a lot of supply comes online," he said.

ADDITIONAL REPORTING BY GEORGE MCLEOD