Kim Vibol and his family are benefiting from purchases made before property prices began their sudden rise. Land he owns in Kampong Speu has increased in value by about 10,000 percent over the past decade.
As real estate prices continue to rise in the big cities of Cambodia, family homes of all types and sizes are becoming valuable assets for many Khmer middle-class families.
Cambodia’s political stability in recent years has resulted in foreign investment companies using various means to secure land for development on a scale that is sending land prices sky high.
Building costs are also on the increase. The weakening of the US dollar is causing dramatic inflation in the price of imported building materials and supplies.
The price of steel has doubled in the past six months; clay bricks have risen from $330 to $1,000 for 10,000 bricks. These factors have combined to push residential real estate prices to record highs, particularly in Phnom Penh where land prices are experiencing the greatest increases.
Kean Kim Leang, president of real estate developer Oceana International, said family homes are becoming valuable collateral. As the value of homes rise, owners can borrow against them and take out bank loans at normal interest rates – about 12 percent – instead of the up-to 48 percent rates charged by private lenders outside the banking system, which were once the only option to middle-class families.
Some families are now using their new bank loans to either start businesses or speculate in land investment.
In many areas land is rising in value at a rate of 50 percent or more per year, said Leang. People buy land, sell it at a quick profit, repay the loan while reinvesting the profits in other cheaper land, which they might resell later or hold longer term.
Meanwhile, rural families who can afford it are moving to the outskirts of Phnom Penh to buy family homes where the prices are rising fast, said Leang. The family home then becomes an investment and the family may run a business on the ground floor and rent out upper floors for cash flow.
Kim Vibol moved his family in 2004 from Kampong Speu to Phnom Penh to buy a two-story flat behind the Royal Palace for $10,000. The family rents out the upper floor.
But Vibol says his most valuable asset is land that he purchased in Kampong Speu in the late 1990s for $200 to $300 per block. That land is now worth $20,000 per block – a 10-year increase of over 10,000 percent. The home he purchased in the province for $600 is now worth about $35,000.
“I am very happy that I have planned for my family so well,” said Vibol, who currently earns $200 per month as administration advisor for Naga Corporation.
“I saved my salary to buy rice fields. I had to work when I was young and had no time to study, but now my children are getting a good education in Phnom Penh and learning English,” he said.
But the growth is not good for all, as many new families and young couples find themselves unable to enter the market.
San Phalla, a teacher and businessman living in Phnom Penh with his wife and newborn daughter, said he has dreamed of buying a family home since he married in January 2007. “Two years ago houses were affordable,” Phalla said. “I thought once I married it would be easy to buy a home, but prices are so high now that no one can afford it. For a new family like us, it’s not possible anymore.”
Phalla estimates that even if housing prices stay at current levels, it would take him 5-10 years of good business to save enough to purchase a basic family home in an outer Phnom Penh suburb.
The problem, Phalla said, is that prices are rising at a faster rate than he can save.
“Even if we purchase land, it’s too expensive to build on it,” he said. “The price of building has doubled from when we started looking.”
For those who already own homes, the property boom is great news, Phalla said, citing as an example his uncle, who three years ago built a home for $10,000 on the outskirts of Phnom Penh which he recently sold for $35,000.
But for people like 25-year-old Sum Sothearith, homeownership is a distant dream. She moved to Phnom Penh to work three years ago and began renting a small room with shared facilities for $30 a month.
“At that time I had a plan to save and buy a flat in 2010 for me and my brother and sister.
“But now everything has gone crazy. With the price of flats now, I don’t think it will ever happen,” she said.
The problem, according to Sothearith, is that not only have property prices risen out of reach, but the cost of food, petrol and utilities is also increasing, making it more difficult to save anything when wages are stagnant.
The only good news is that rent for low-income families appears not to be rising at the same rate as properties in mid-range and upmarket areas.
Sothearith now pays $35 per month for her room. She says she recently looked for a new place and found that prices for cheap rental homes in the past three years have gone up about 15 percent.
Other victims of the property boom are poor communities with the recent misfortune of being in prime locations. Already many communities have been evicted, and as the market keeps rising, members of other poor communities wonder about their future.
“We have lived here for 17 years,” said Chun Buntol, who lives on the riverfront in Tonle Bassac commune. “But now everyday we are afraid we will be forced to leave.”
Already the land behind the riverside road where he and his neighbors live has been cleared and construction begun. Locals believe it is just a matter of time before they will be evicted.
Buntol says if offered market value for their land many people would choose to sell and buy land farther from the city.
“But getting market value is not the only issue we face,” Buntol said. “We want to choose whether we want to sell or stay.”