Cambodia’s real estate sector saw its first sure signs of recovery through 2011, as investment slowly returned and many companies resumed business. VTrust Property Co, a Phnom Penh-based real estate service provider, believes that while investor confidence is slowly returning, the sector still faces challenges. Post Property reporter Seun Son interviewed VTrust deputy director Chhrek Soknim about the ramifications of the global financial crisis and the future of the industry.
Heng Chivoan/Phnom Penh Post
VTrust deputy director Chhrek Soknim
Why did VTrust decide to open a business in the property sector?
We launched the company because Cambodia follows a free market economy, which encourages foreign investors to pour their capital into the Kingdom’s real estate sector. This was highlighted in the 2007 when the market peaked due to an influx in investment, especially from South Korea.
How has the global financial crisis impacted the development of the Kingdom’s construction and property sector?
Two major internal and external factors contributed towards the decline of the sector during this time. The external factor was the effect the global financial crisis had on the entire Cambodian economy bringing it to a standstill, which resulted in project delays and company closures. The internal factor refers to those foreign companies, largely Korean, involved in speculative buying. These investors, described as balloon buyers, came to Cambodia to set-up short-term investments, but many pulled out leaving projects unfinished.
Did the downturn directly affect VTrust’s operations?
It’s true that the period proved to be a major challenge to our company and we considered closure on numerous occasions, especially when a number of larger firms were downsizing. However, we realised that we needed to adopt a new strategy and reduced rentals by 20 to 30 per cent to attract more customers. We also decided to start investing in the office space sector and quickly started to make a profit, which ensured the short-term future of the business.
How do you perceive the current climate of the property market?
I believe the market has recovered gradually, buoyed by the increase in real domestic investors, such as those behind Vattanac Tower, Canadia Tower and Sihanoukville’s Pearl City Development. These developments appear to have restored balance to the supply and demand chain. Meanwhile, the Kingdom’s banking sector continues to blossom, increasing mortgage opportunities for individuals.
Do you have any concerns over the increasing number of companies operating in the Kingdom’s real estate sector?
We are not overly concerned about the market becoming overcrowded, as we understand that any company can set up operations in Cambodia. However, what is important is that these firms can sustain, survive and withstand the market. We saw the number of companies drop from about 100 in mid-2008 to the current total of about 40. Also, a rapid influx of new realtors could affect existing companies’ business and result in supply outweighing the demand. This is perhaps an issue the government needs to address.
What plans does VTrust have for the future?
In 2012, we intent to start a project management service, as we believe that the Kingdom lacks experience in this field. We would also like to invest in a housing development project of our own in the Chamkar Dong, as we expect similar projects to fuel further investment in the market.