Throughout the economic boom, centrally-located condominiums were achieving on average between USD $1,800 - $2,500 per square metre. During 2007-08, developments such as Gold Tower 42, Rose Condominiums, De Castle Diamond & Royal successfully sold at least 50 per cent of their units off-plan.
Foreign speculators were driving this demand for condos, and even if the initial rental yields were not attractive, investors considered the probable future capital appreciation as sufficient reason to buy.
Relatively few condominiums were bought for owner occupation, which explains why some condominium developments have low physical occupancy rates.
In the immediate aftermath of the global financial crisis, investors were understandably more cautious about buying condominiums off-plan, particularly at the higher end of the market.
In order to stimulate increased demand for condominiums, the government introduced two key pieces of legislation. In 2009, the government passed the sub-decree for the Management and Use of Co-owned Buildings, which allowed building owners to obtain strata titles. This meant hard titles could be issued for individual condominium units as opposed to the previous system of an individual condominium owner receiving confirmation of their ownership from the local Sangkat or Khan office, which is soft title.
The second piece of legislation was the Law of Foreign Ownership (2010), allowing foreign nationals under specific conditions to purchase condominiums with a freehold title. In conjunction with attractive pricing, the new law has helped developments such as Bali resort and Sen Sok Town in Tuol Kork almost sell out completely. The price in both developments for a one bed unit was around $900 per square metre and Bali resort is now in its fourth phase, with further developments planned in the future. The overwhelming purchasers in both developments have been Chinese, but also some Koreans, Japanese and Cambodians.
This growing demand has led to condominiums being developed in up-and-coming areas of Phnom Penh such as Chroy Changva. With infrastructure improvements, including the road widening scheme and the second bridge now under construction, developments such as Mekong Gardens offer condominiums with panoramic city & river views, but still within easy reach of the city centre.
In the future, demand will need to come more from Cambodians who traditionally do not purchase condominiums, preferring to buy shop houses or villas. For the emerging Cambodian middle class, shop houses represent the opportunity to purchase land, which is an attractive option given the obvious historical reasons. The ground floor of the shop house can be used for retail and generate an income whilst the upper floors are used for living. Unlike a condominium, it is easy to add another floor, allowing extended family to move into the shop house.
The growing population of Phnom Penh means that in the future Cambodians will likely occupy condominiums, as it will not be possible for everyone to own land. Coupled with the increasing amount of foreign investors and long term expatriates, CBRE Cambodia predicts increasing demand for well-located and properly financed condominiums.