AFTER less than three days of debate at the National Assembly and years of preparation, Cambodia’s long-awaited law on foreign property ownership was passed Monday morning, a development that drew positive reactions from the subdued real-estate sector.
The law – passed with 85 lawmakers in favour and 11 opposed – now awaits approval from the Senate and King Norodom Sihamoni, both steps that are considered formalities.
“This law provides for economic interests, social interests, legal interests and also the integration of Cambodia’s investment [environment] within a global and regional framework,” Minister of Land Management Im Chhum Lim said Monday, adding that it would stop the practice of foreigners’ buying property in the Kingdom under the names of Cambodians.
One of the drawbacks of this practice, Im Chhum Lim said, was the emergence of complex legal cases in which foreigners who “owned” property listed in a Cambodian’s name claimed to have had their assets stolen.
Analysts say the new law – which allows foreigners to own property so long as it is not on the ground floor of a building, even as owning land outright remains prohibited – is significant for a number of reasons, and expressed optimism that it will provide a boost to the sector after a difficult 18-month slide.
National Valuers Association figures showed Monday that residential property fell in price by 3 percent and commercial property by 2 percent in the first quarter compared to the previous three months, a sign that the depressed market has yet to bottom out following its rapid decline at the end of 2008.
“It increases confidence in the market.... It sets things within the law,” Daniel Parkes, Cambodia country manager of global property agency CBRE Richard Ellis, said Monday.
On Friday, CBRE, in conjunction with ANZ Royal and Indochina Research, released a survey in which 55 percent of potential buyers said they would wait more than two years to invest in the property market, with just 11 percent considering buying in 2010, an indicator of a sluggish year ahead.
Parkes said the new law will help spur foreign interest, and that those preparing to invest now will benefit from an upswing by 2011.
“The next six months are a good time to buy,” Parkes said.
Still, questions remain concerning exactly what form regulations on foreign property ownership will eventually take.
Though the draft wasn’t altered during debate in the National Assembly, previous drafts of the law stipulated that foreigners would be able to own only 49 percent of a building, guaranteeing majority ownership of at least 51 percent to Cambodians. However, that clause was withdrawn from the final draft debated by lawmakers. The only restrictions for foreigners, according to the law passed Monday, apply to ground-floor apartments and land ownership.
Therefore, under the law, a 10-storey building in Phnom Penh, for example, could in theory be 90 percent owned by foreign buyers, whereas, according to a previous draft, a foreigner could only own 49 percent, as is the case in Thailand.
“Comparatively, it’s more appealing than Thailand and Vietnam” for foreign investors, Parkes told the Post.
Opposition Sam Rainsy Party lawmaker and spokesman Yim Sovann said he supported all components of the final draft except Chapter 2 Article 6, which permits foreign ownership of property in special economic zones. This could allow foreigners to run casinos, he said.
The SRP also remains concerned about how the law could affect land rights, Yim Sovann said, adding that the government should issue land titles along Cambodia’s international borders. The new law does not allow foreigners to own property within 30 kilometres of Cambodia’s borders with Thailand, Laos and Vietnam.
Sung Bonna, president of Bonna Realty Group, agreed that the law will help attract foreign investment to the sector.
“It’s a positive step,” he said Monday.
The government is, however, understood to be planning a sub-decree or prakas (edict) to establish the ratio of foreign ownership, making it easier to adjust than if it were enshrined in the newly passed law.