2015 was a year of launches for Phnom Penh, with residential properties being over proportionally represented. The real estate sector is booming as it has never been before and the majority of launched developments are scheduled to come online in 2018. With this growth comes challenges, however. Phnom Penh’s infrastructure has to keep up with private development and so do laws and regulations. And while the skyline is set to rapidly change over the next few years, one question remains to be answered: who will eventually live in all these new condos? Post Property asked leading real estate industry experts on their assessments of 2015 and what they believe the property market might look like in 2016 and beyond.

Rithy Sear Chairman, Oxley WorldBridge ‘Buyers be careful, make investments you understand’ Comparing the country’s high growth against its neighbours, local property prices are reasonable for investment purposes or buying a home for oneself to live in. The uncertainty in the market is usually caused by non-genuine developers who do not price their projects fairly despite non-premium locations. Some buyers, then, make risky purchases by thinking they have got a good deal from these projects which is often not the case. After a while, these investors start to spread fear and cause undesirable uncertainty in the local property market. Buyers are encouraged to make careful investments by first studying and understanding the potential of a project based on location and the developer’s background. At the same time, all developers should be fair in pricing their projects so that buyers can remain confident and safe while also supporting the growth of the local property market. In this regard, it is heartening to learn that the authority is already getting strict on Construction permit applications. This will eventually turn away non-genuine developers and shape the property industry in a more orderly manner.

Sharon Liew CEO, Huttons CPL ‘I predict an investment shift towards commercial properties’ Over the last year, we saw more foreign developers moving into the local Cambodian real estate market developing bigger projects with higher quality standards. They are leaving a lot of local developers behind with the exception of a handful of local developers bucking this trend. The number of residential projects going on stream this year and the next suggest an increase of more than 500 per cent. The delivery for most of the new condominiums will clutter around the end of 2017 to 2018, with so much supply of residential property in the market that the chances of Phnom Penh becoming a ghost town could be rather high. Ultimately only properties in prime locations will hold their value as portrayed in most developed countries. The supply of office units will still be relatively low compared to the residential market, showing an increase of only 68 per cent. Therefore I predict an investment shift towards quality commercial, retail and industrial properties, as more Cambodians are being exposed to a globalizing market platform and more international companies are setting up offices in Cambodia, especially with the integration of Cambodia into the AEC. For next year I hope city planning becomes stricter and overall public infrastructure improves. This has to go along with the proper implementation of laws and regulations pertaining to real estate, set-back and boundaries. Emphasis on green infrastructure should start now rather than trying to rectify it at a later stage. Government set incentives would be key to these infrastructure changes.

Kim Heang Owner and Director, of Khmer Real Estate and President of the CVEA (Cambodian Valuers and Estate Agent Association) ‘The law has to become strong’ The most significant development for the property market over the last year was the credit growth, specifically in mortgages. Without bank loans there would be less people involved in the Cambodian real estate market. The GDP is growing and so is the middle class, especially in the capital. The real estate sector is benefiting from urban infrastructure development, which increases the value of properties. Foreigners can buy condos in Cambodia or they can apply for citizenship, so that they can buy land. Of course they can also acquire property in the form of a joint venture with a local partner. I am happy to see the rise in GDP growth, the middle-class dynamics and infrastructure development, but not with the condo market and the borey market as we will see an oversupply very soon. With more people having bank loans, real buyers cannot buy and sellers cannot sell because of a developing bubble in prices. Many foreign investors just want to make fast money and run away from Cambodia with their profit. The law is not strong enough. However, what must be taken into consideration is how growth and stability will be affected if the laws are changed.

Thomas O’Sullivan Director, realestate.com.kh ‘Large-scale development opportunities lie outside the capital’ Building high-end condos still remains the lowest-hanging fruit in the real estate and construction industries in Cambodia, and this is naturally concentrated in Phnom Penh. Investors are very attracted to USD-based investments in the Kingdom, because of the lack of countries in the region that use the US currency. This is especially so with regional economies cooling over the past year; China being the prime example. Neighbouring property markets also seem to be slowing down as a result. Meanwhile, large-scale residential property developers are only beginning to touch the surface in local regions such as Sihanoukville, Kep and Kampot, to name a few. Development of other urban centres will help ease the strain on Phnom Penh’s infrastructure. Further, other opportunities to assist what represents the majority of the local market - the lowest income bracket - are still waiting for large-scale commitments from the private or public sector, such as affordable housing schemes, student accommodation and even affordable commercial office space. But there are more mechanisms that the industry and government can employ to ensure continued growth. Exploring the issue of land ownership by a foreigner, for example. Nevertheless, regulations seem to be right at the moment. Ultimately, the best interests of Cambodian nationals should be kept in mind, ensuring locals benefit from the growth of their own economy.

Saraboth Ea Managing Director, Maxem Property ‘The high-end market is still five years away’ Developers are starting to take more notice of the mass and mid-end segment which is an encouraging sign. The high-end market is really another five years away in terms of locals being able to afford these units for actual residential living. In the short to medium term, there will be an oversupply of these units and people should reduce their investment in these types of units until we have a clearer picture of the market in 2018. Supply should be more focused on what the housing market really needs in the next five years. More young couples and families are adopting the Western idea of living independently and now are seeking affordable housing. Yet they can’t afford to buy apartments of their own. So currently, there is a mismatch in supply and demand based on the segment of potential buyers looking for real housing, and the supply of units that will be available. If development focuses too much on the speculative higher-end segment, this will lead to a lot of empty condos in the future which no one wants to see happening. Greater regulatory oversight should also be considered to avoid the market overheating.

Sung Bonna Chairman, Bonna Realty Group ‘We need foreigners to absorb the supply of residential properties’ One of the most important developments of 2015 was the influx of Foreign Direct Investment, especially from other Asian countries. The timing for Cambodia was lucky: the weak Chinese yuan and the strong US dollar made Cambodia an attractive frontier market to invest in. Thailand’s and Vietnam’s currencies lost in value making these markets less attractive, and Myanmar wasn’t an investment hotspot in 2015 because they had the election. Talking about the ASEAN integration, it’s hard to predict an outcome because we don’t know how big the impact of the ASEAN integration will be in the short term. What is concerning might be the current supply of residential properties. The city of Phnom Penh and the country’s population in general is quite small and we need more foreigners becoming active here in other sectors, such as industry and agriculture, to absorb the supply of residential properties. Over the next year, possibly the next few months, we will see more signs of what may happen. Watch out for actual occupancy in the residential properties or how foreign investment is changing. As for the Cambodians: they are becoming used to financial support from banks. It’s too early to say that there will be a problem. If the market remains active there will be no problem, but if not we may see a domino effect. I believe the NBC has ways to control this, however.

SIMON GRIFFITHS Associate Director CBRE Cambodia ‘This was a year of change’ 2015 was a year of change, with new developments launching across all sectors and CBRE expects to see this trend continuing into next year. 2017 and 2018 are destined to be the years when Phnom Penh’s skyline is set to change with many new developments coming online. It is an exciting time for Cambodia in terms of real estate, but with growth comes challenges, so it’s also a time for developers, agents, buyers and tenants to be aware of the changing market place and demonstrate knowledge and adaptability to get the best from it. In terms of growth in sectors, we hope to see Cambodia grow in terms of industrial / factory development and SEZs fulfill their potential. In the shorter-term, we expect to see the office market continue to strengthen with a second Grade A building coming online and the retail sector expand further into new retail spaces being developed.