There are already signs that the building industry is recovering from the global financial downturn, the construction minister said at a recent meeting
Photo by: TRACEY SHELTON
Developments like this one on Street 240 will continue to grow, the construction minister says.
Major construction projects approved by the Ministry of Land Management, Urban Planning and Construction
Total approved investment (USD)
Cambodia's top construction official says a slowdown in the construction sector in the second half of last year was a temporary blip induced by the global financial crisis - and he expects the rapid growth in the sector seen over the last decade to resume by the end of 2009.
Im Chhun Lim, the minister of land management, urban planning and construction, told Prime Location on the sidelines of the construction ministry's annual meeting last Thursday that signs were evident that the sector was already rebounding after a number of high-profile developments were slowed, cancelled or put on hold towards the end of last year, resulting in mass layoffs across the sector.
"We recognise that the number of construction sites declined due to the economic crisis, but many construction sites continued," he said. "We are now looking forward to the end of this year when we expect the problems that we have had to change for the better."
Figures released at the meeting show that, despite the crisis, the book value of major construction projects approved by the ministry fell just 1.14 percent last year to $2.96 billion from a little over $3 billion in 2007. In all, the ministry approved 181 projects last year, up from 167 the year before.
Ministry approval is only required for projects over a certain value, with the bulk of projects approved at the municipality or provincial level. Ministry figures show there were 1,975 such construction projects valued at $224.8 million approved in 2008, up 6.5 percent on a year earlier.
It is a great sign that construction of sub-cities is continuing…
However, the ministry figures do not detail actual spending, nor do they give the month-by-month breakdown required to evaluate the effect of the global financial crisis, which kicked in around the middle of last year.
The decline in approval values came after the value of approvals grew 313 percent in 2007 from just $726.1 million in 2006, when 127 major projects were approved.
But figures released Tuesday at a semi-annual donor review meeting show the ministry approved 42 new construction projects in February, only slightly down on the 49 approved in February 2008. February showed a marked improvement on a month earlier with only 28 projects granted approval in January, well down on the 52 approved the same month a year earlier.
Ministry Director General Im Chamrong told Prime Location Tuesday that the sector was already showing signs of a rebound, citing Minister Im Chhun Lim's attendance today at the groundbreaking ceremony for a new city in Preah Sihanouk province called Kuch Asia as evidence.
"It is a great sign that construction of sub-cities are continuing during the crisis period," he said.
AMCO Construction, an affiliate of South Korea's Hyundai Motors, was also preparing to begin construction of a 22-storey office tower on the corner of Monivong and Sihanouk boulevards, to be called Phnom Penh Tower, AMCO sales and marketing manager Tim Sovanara said.
Eight smaller office buildings also hit the rental market in Phnom Penh this month, while Canadia Bank's new 29-storey office tower is expected to be unveiled later this year. Vattanac Bank is building an even taller office building next door, though no date has been set for its delivery.
Sear Chailin, the director of Visal Real Estate, said growth in the construction sector over the past few years meant that a lack of demand rather than a lack of investment in new buildings was the biggest problem Cambodia was facing, leading to rapidly falling property prices.
"The construction sector grew rapidly over the last two years and, while it is still growing slowly, prices have dropped 30 to 40 percent as nobody is buying or renting and a lot of people have announced they want to sell their properties," Sear Chailin said.
Many owners of the new office buildings have revealed in recent weeks they are bracing themselves for lower rents than they had anticipated when they began building at the height of the boom a couple of years earlier.
Many in the sector are hoping a law change under consideration that will allow foreigners to own apartments, houses and condominiums from the second floor up will boost the sector if passed.
The draft law, which has long been in the works, was circulated to the private sector last week for consultation, after which it would be sent to the Council of Ministers and the National Assembly for consideration.
Brett Sciaroni, partner at local law firm Sciaroni and Associates, said the law would boost the troubled property sector and make Cambodia a more attractive investment destination when passed.
Sciaroni said it was uncertain when the law would take effect.
"I would hope this year," he said. "The sooner the better. What is clear is that this is on a fast track. By Cambodian government standards it is moving through the process very quickly.