Real estate agencies in the Kingdom are shifting their focus from traditional, low lying real estate market and are adapting in order to cash in on the condo boom.
The local Khmer market is traditionally fixated on land, villas and borey homes. With prices between $1,500 to $3,000 per square metre for high-end condo units in the capital, the local market has been slow to respond despite international excitement.
After all, local investors can just as easily buy land - a time proven real estate investment.
Some agencies, however, are partnering with international expertise and connections to challenge this current market gap. This year, Huttons, the Singaporean real estate giant, has entered into a partnership with the local agency CPL, first established in 2007, to form Huttons CPL Cambodia (HCPL). Huttons brings an international network of Hutton’s offices, which draws sales referrals from international buyers for Cambodian condos.
More developed countries in Asia such as Singapore, China, Hong Kong and Taiwan are attuned to the growth and investment potential of Cambodia. Compared with returns on investment in their home markets, a good condo sales team with the necessary international connections can quickly persuade these investors to look to Cambodia where five per cent should be the minimum return, with some new developments offering as much as seven to eight per cent guaranteed rental returns.
Sharon Liew, CEO of Huttons CPL, says the key to selling condos to these investors is client commitment and professional customer relations. HCPL currently represents Eastland Development (HK) Ltd, a developer with vast experience in the Chinese real estate market now bringing condo and office space developments to Phnom Penh en masse.
Condos are high-end products that equal a large investment, notes Liew – “therefore, our sales staff must be able to manage clients, international and local, with a level of professionalism to match the development’s value and prestige.” This means intensive training, and high commission pay outs for the seller.
The marketplace is also seeing some investors buying in bulk, at lower rates, to multiply investment benefits. When buying 10 to 20 units at a time, at a reduced rate per unit, investment companies are convinced that returns are unavoidable.
Furthermore, if these regional investors can borrow money relatively cheaply in their home markets, even if they get “low” returns from condo investments in Cambodia in the short term, they are still achieving profits ahead of their country’s interest rate.
Regardless of this projected benefit, some local real estate agents do not see the condo market as such a safe bet for investors. Desmond Yap, general manager of Yong Yap Properties, advises some clients who are seeking investment in the Kingdom to avoid condominiums for the next couple of years and look at other options, with fears of a bubble in the condo market inflating to a point of foreseeable risk for his clients.
It is no secret that low residency rates continue to inhibit post construction sales, and rental returns for new condos dominated by international investment thwart investor confidence throughout the market generally.
Therefore, the new focus, and the challenge, of condo-focused real estate agencies, is to move middle and upper class Khmers from investing in land to investing in high rise property.
Furi Real Estate is the largest pure condo agency in Cambodia, in regards to agencies, agents and overall sales. Furi attributes 98 per cent of their condo sales over the last three years to Khmer buyers, according to CEO Ly Senleap.
Furi encourages locals to sell land, pool their savings and buy sets of condo units as live-in investments. By buying several units or a floor at one time, these buyers can save on market prices. Furi currently has an exclusive listing over “The Bay,” an already-renowned condo complex being built on Chroy Changvar by the Singaporean-based TEHO-SBG Development Co., Ltd.
Furi’s target market are middle to upper-class Khmers between the ages of 28 and 45 years old. At first, Ly had doubts that Cambodians would invest in condos, but as international investors continue to buy in, the local market is being reassured.
Meanwhile, for the new generation, “a condo is a lifestyle choice based on convenience,” says Ly.
Guaranteed rental returns are a tool condo-focused agencies are using to attract investors - local and international. Yet to truly achieve these guarantees requires property management teams that have done their research and are experienced in the industry. “By allowing us to manage their investment through rental arrangements, buyers are expressing their trust in our agency,” says Liew.
“Service is the name of the game,” believes Yap, who notes that most players in the market are not experienced with management of a building which greatly affects their occupancy rates post-sales and ability to maintain guaranteed rental returns.
“We’ve had rental clients turn down better built condominiums which are cheaper than other condominiums because they did not like the service and management team,” says Yap. In this regard, the job of condo agencies does not end when sales are completed. These guarantees, therefore, are only as good as the strength of the company offering it.
James Whitehead, Realestate.com.kh