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Logo of Phnom Penh Post newspaper Phnom Penh Post - In response to the Post Property article ‘2018 - the year of the empty condo?’

In response to the Post Property article ‘2018 - the year of the empty condo?’

After sharing my thoughts with the editor of Post Property regarding the above mentioned article in last week’s issue which I believed was to sway readers towards an overly negative opinion of the condo market – it was suggested that my opinion be shared by way of a letter to the editor, which this is.

Firstly, rents, capital value and occupancy do not always directly correlate. Low occupancy does not mean low or negative capital growth at that development. Wider market forces are at play and need to be understood in their entirety to draw insightful conclusions.

Content image - Phnom Penh Post

Secondly, it is reasonable for one to assume in relation to the rental market of condo’s that the total supply of condo’s vs demand = rental price, simply supply / demand economics. However, this would imply the total supply of condos were available for rent. Not all owners are ‘willing’ to rent their condos. Renting their condos would mean spending time organising such a rental. This could involve arranging one or more companies to manage, lease, furnish and maintain the condo. The condo would potentially suffer normal wear and tear from its occupation and the flexibility to use the condo for family or friends would no longer exist. Many local and foreign investors are cash rich and time poor. Capital appreciation is their main objective. For some, owning one or more condos may infer a sense of status. I pose the question, if you had the money, would you consider buying a condo in one of the new iconic buildings which will complete by 2018 and be proud to be an owner? Perhaps you would or maybe would not. Not one person is the same and individual investment characteristics vary widely. It is true in Cambodia many do not wish to rent out their condo units for a wide range of reasons. This means lights are off, this does not imply an impending doom for the market or the developer or condo investors have failed. In fact, in most cases it is the opposite.

The market is changing, that is undeniable. Postulating, ‘2018 - the year of the empty condo?’ provides a suggestion before answering the question. I ask you, will people now renting serviced apartments move to renting new condo’s? This is what has happened in Singapore and Thailand. Are there any reasons why it shouldn’t happen here when you consider the new iconic buildings under construction which will boast first class facilities and amenities? Serviced apartments will be another three years older by that time. Yes, there will be over 10,000 more residential units in three years time. However, these will come onto the market at different times, with different prices and different qualities, in different locations. Residents, your choice of where to live will have changed for the better. Investors, the market is healthy, ensure you choose a condo which suites your investment characteristics, be it long-term, short-term and if rental returns are a key component of your investment strategy, furnish your units to differentiate yourself above your neighbours, select a good agent and choose a development that will be well managed ensuring the long-term and short-term rentability of your units.

Yours sincerely

Simon Griffiths
Associate Director CBRE Cambodia

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