Ministry of Economy and Finance official Hang Chuon Naron says that Cambodia's weakened real estate market is likely to be back on track within two or three years.
"I hope the real estate market in Cambodia will return to normal within the next three years," Hang Chuon Naron told Prime Location on the sidelines of a recent conference on initial public offerings in Phnom Penh.
He also said that the global financial crisis and the recent slowdown in construction in Cambodia were the causes of the sluggish market.
"I think we will face a long-term standstill in the Cambodian real estate market. However, it won't affect the economy because government limits bank lending" for real estate projects, said Hang Chuon Naron.
Currently, Cambodian commercial banks have a total of US$2.5 billion a year to allocate to real estate lending.
Sung Bonna, president of National Valuation Association of Cambodia, said the Cambodian real estate market was down by about 20 percent this year and growth could come to a standstill in the coming months.
But, he said, "I think the real estate market will shoot up next year because the global financial crisis will have gradually been solved," said Sung Bonna.
The real estate market in Cambodia started to decline in July this year as national elections approached.
National Assembly member Son Chhay, a member of the opposition Sam Rainsy Party, said the decline in the real estate market was due to slowed foreign investment, particularly from Korean investors and overseas Khmer.
"I suspect that Cambodian economic growth might drop to only five percent if the real estate market sees a long-term slowdown. The analysis of government officials that real estate does not affect the country's economy is wrong," said Son Chhay.
"I think government limitation of bank loans to the real estate sector is insignificant, but if the decline of real estate market continues, it could make bank depositors lose confidence and withdraw their money. Then there might be serious consequences," Son Chhay said.