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Building momentum

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Sung Bonna, president and CEO of Bonna Realty Group, says foreign investor interest remains high in Cambodian real estate

Photo by: VANDY RATTANA

Bonna Realty Group president and CEO Sung Bonna is optimistic about the health of the Cambodian real estate sector.

What are the current trends on the local market during the global economic crisis?

Our data shows the average market price is down between 5 to 10 percent since highs during July. It had picked up steadily until June, but July was the timing of the election, the beginning of the rainy season, the conflict with Thailand on the border, and the global economic crisis.  It made our property market fall asleep and go down a bit.

Residential and commercial real estate are the only areas with any real activity now. Agriculture and industrial real estate are asleep. Class B and Class C are also sleeping - the land on the outskirts of Phnom Penh.

The global economic crisis gave people the feeling that the property market had to go down. But when the global economic crisis peaked, it was during the P'Chum Ben holiday. There was less activity during that time, so maybe it didn't have as much of an effect as it could have had.

Another thing was the new prakas from last month [raising deposit and licensing requirements on developers]. It affected some developers and investors. The prakas itself wasn't a big thing, but we've never had many rules like this, it's a new thing, so they just felt concerned. Especially speculators, they had a bad feeling about this. We still think it will pick up again soon.

Are the areas of intense development still the same?  

The leading hot spot is Phnom Penh, and then Siem Reap and Sihanoukville. Property investment is also moving quick along the border with Vietnam and the border with Thailand. Now, it seems like everywhere in the country has land investment. Sihanoukville might be the place with the most growth for a number of reasons - like industrial and economic zones, an international airport, and tourism moving down there from Siem Reap.

And from there, it's moving along the coast to Kampot and Kep, where land is cheaper.

Where else are foreigners realistically interested in investing and living?

The islands off of Sihanoukville are best suited to development because of their size.

There are a lot of good views about the future... I see a lot of foreigners making cambodia their second home.

Are the big-ticket developments there good for the country?

If they can do what they say they will do, then it should be good. It can attract a lot of tourism. But the big development projects, they often just feel like dreaming. It will take a long time before this happens.  It's better if it doesn't move too quickly. Everyone just wanted to get the first chance to own the islands, but development is still a ways away. Developers are still looking for financing and partners.

Has Cambodian experienced a real estate bubble in the last couple of years?

Looking at supply and demand, and comparing it to neighbouring countries, land prices in Cambodia look reasonable. When you look at only one side - the wealth of Cambodians and the GDP of Cambodia - the price of land looks very high. But when you look at other factors, like momentum and potential, there is a lot of excitement about Cambodia.

There are a lot of good views about the future, about tourism here. Cambodia will have oil, has minerals and good potential with agriculture. I see a lot of foreigners who are making Cambodia their second home, a lot of Filipinos, Chinese, and Koreans who say life in their country is more difficult. So far, we see the Koreans here the most. But, if we are talking about the future, maybe we will see more and more Europeans as the environment becomes more comfortable for them.

Compared to other countries, it has more potential, especially if the government changes a little bit to improve confidence, changes something to serve investors. When I meet investors at forums, they say they are really interested in investing here. They say there are just some small points that make them not want to invest here, like the legal structure, inflation and costs.  

Is the rash of high-rise developments in Phnom Penh appropriate?

I recommended to some developers against building high rises since the demand is only for expats renting. Cambodian families are still not ready to live in these high-rise buildings. The city is still small. For example, with Korean developers, they move very fast and don't always care about the (local) situation. I think these big projects will take longer than they say. But they have lots of experience.  

Are Middle East countries investing in real estate in Cambodia?

They are starting to test the market. They are moving slowly. This is a good thing, but it is hard to say the number of investors from there.

What moves should the government make to improve the real estate market?

If the government can clarify zoning, it will help because now you have lots of industrial space mixed with residential. If the government moves industrial spaces out of the city. It is hard to have zoning in Phnom Penh, outside of the "new" cities like Grand Phnom Penh. It will take time to do this. Zoning helps you keep track of trends in real estate.

The Council of Ministers are looking at the 2020 master plan for Phnom Penh development this month. Why is it taking so long for the Council of Ministers to approve it?

I don't know. If you ask about the law or corruption, like the prime minister said the other day, that's why the plan is taking a long time - many, many months; many, many years - when this kind of law should take a maximum of three or six months to adopt. I don't know what they are doing. The law was submitted at least a year ago. I saw it at least a year ago.

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