Over the last year the US dollar has greatly appreciated compared to currencies used by many of Cambodia’s foreign direct investors, making it relatively more expensive for them to invest in the Kingdom – this applies to the property market as well.

Compared to April 1, 2014 the US dollar has now become 29 per cent more expensive when paid for in Euro, 9.6 per cent more expensive then the Singapore Dollar, and 15.8 per cent more expansive then the Japanese Yen. As reported by the Post last Friday, April 27 experts fear that exports from Cambodia will decline as the US dollar continues to appreciate, especially to the European Union.

By consulting three experts, Post Property asks the question of how could an expensive US dollar affect foreign property investment.

“In theory, [a strong US Dollar] may impact both developer FDI and investor demand, where that emanates from countries with depreciating currencies relative to the US dollar,” ANZ Royal CEO Grant Knuckey told Post Property.

Hence, investors from Japan, Singapore, the Euro zone and other countries whose currencies have depreciated, could decide against developing or investing in new property projects in Cambodia. However, in theory, Knuckey believes investment won’t be affected yet.

“In practice, I don’t think the impact is significant as of now, for a number of reasons. Firstly, for foreign developers, at this stage developer margins are so healthy and offshore US dollar funding rates so low, that I don’t think the strong US dollar is a big factor. For foreign investors in individual properties, it may be a factor in demand at the margin. But absolute prices are still low enough and yields attractive enough that I don’t think it will cause a material change,” he said.

Stephen Higgins, a banking expert and managing partner of corporate investment and advisory firm Mekong Strategic Partners echoed this sentiment, and reminds Post Property that property in Cambodia continues to present a stable overseas investment.

“While the US dollar is much stronger against the Euro and Yen for example, it’s been relatively stable against the Thai Baht and the Vietnamese Dong, and Cambodia is competing against those countries for (property) investment, rather than Europe,” he said.

“If yields on US dollar bonds really start to pick up, which would strengthen the dollar further, then you may find some investors deciding that the very low yields on offer for Cambodian real estate become less attractive, and start to avoid the Cambodian market,” he added.

While there are no signs indicating a scenario of an even stronger US dollar, foreign property investors who are already established in Cambodia could be tempted to cash-out quickly if the dollar continues to appreciate.

ANZ Royal’s Grant Knuckey says this scenario is possible.

“We could see some attempted ‘flipping’ from investors who want to cash in on both strong levels of demand as well as the US dollar trend. But personally I would be interested to see whether much of a secondary market actually exists for investor property here - I have my doubts,” he said.

Ann Thida, senior associate director at CBRE on the other hand has no doubt that US dollar arbitrage earnings will never outweigh the good prospects of the Cambodian real estate market.

“There are strong fundamentals showing the property market is improving, so why would investors cash in if they believe the value of their investment is increasing?” she asked Post Property in an email.

As demand and supply for foreign direct property investment seem largely unaffected by the US dollar rally due to a generally optimistic outlook on the Cambodian real estate market the local construction industry has reason to cheer.

The 132 per cent year-on-year increase in import of construction equipment between October 2013 and 2014, as reported in ANZ Royal’s Quarterly Mekong Outlook, is a trend that could carry into next year.

”Most of the raw materials for the industry are imported, as is the heavy equipment. Certainly, the strong dollar is aiding developer margins at this stage, and is assisting them at avoiding greater reliance on debt funding. This factor is one that should extend the duration of the development trend,” Knuckey said.