Strong growth in Cambodia’s real estate market bucks global slowdown and declining trends in Thailand, Vietnam
Construction workers leaving CamKo City outside of Phnom Penh.
$5,500 per square metre
Commercial land prices in June hit US$5,500 per square metre on Norodom Blvd; $5,000 a square metre on Monivong Blvd; and $5,000 a square metre for residential land on Sisowath Quay.
hnom Penh land prices surged almost 150 percent over the past 12 months to July, according to an August report from Cambodia's largest realty company.
The increases come despite slow property markets in the region and economic turmoil overseas. "Commercial land reached an average US$4,100 per square metre in the first half ... compared to the same period last year, which averaged $1,500 a square metre," stated the report by Bonna Realty Group.
Residential property hit an average $2,300 per square metre, up 140 percent compared to the first six months of 2007, which saw prices of $750 a square metre.
In June, commercial land prices hit $5,000 a square metre on Monivong and Sihanouk boulevards; $5,500 per square metre on Norodom Boulevard in Daun Penh district; and $5,000 a square metre for residential land on Sisowath Quay along the riverside, said the report.
Cambodia's real estate boom comes despite a generally stagnant property market in Thailand and declining values in Vietnam.
Thai property has been held back by political instability and strict regulation while Vietnam has seen sharp declines on high inflation and government-imposed credit restrictions.
"This year there has been a slowdown [in Vietnam]...High inflation, high interest rates and high construction costs are putting pressure on real estate," said Naim Khan Turk, the director of research and consultancy at CB Richard Ellis in Ho Chi Minh City.
"The sector has come under pressure from higher construction costs and higher lending rates.... Most of the slowdown has been in the high-end segment," he said.
A local banking source said Cambodia's property sector could withstand the international slump, depending on the length of the crisis and the nature of the investment.
"A lot of the money is coming from abroad. If [foreign] investors are buying with cash, property should fare well. If investors are borrowing to buy property - the sector will soften," Bonna Reality president Sung Bonna told the Post, adding that Phnom Penh's land prices had been hit in July due to the election and the Preah Vihear dispute, with some residential areas falling between five and 10 percent.
He expected prices to pick up within three months of the election.
"Land prices are expected to rise between 30 percent and 50 percent after the election due to high demand from business developers and high-rise construction," he said.
the Cambodian market as a whole is about half the size of
Ho Chi Minh City.... Cambodia is still very much an emerging market.
In Sitha, general manager of Sovannaphum Realty, said that the impact of Preah Vihear and the election had been largely confined to the speculative market.
"Land prices last month were flat - there were no business transactions on land speculation because buyers dared not to buy and sellers held back," he said.
International analysts have also been generally positive about the Cambodian market and have shrugged off suggestions that the Kingdom is in the midst of a real estate bubble.
"IP Global remains very bullish on the Cambodian property market and we aim to be making an investment there over the next six-12 months," wrote Tim Murphy, the managing director of IP Global in Hong Kong, in an email.
"We need to gain a deeper understanding of legal land titles and also the availability of bank financing to foreign investors. We believe Cambodia remains a valued proposition for Asia."
But Khan Turk of CB Richard Ellis warned that Cambodia's strong property growth numbers may not be as impressive as they seem due the market's small size and low turnover.
"Cambodia is coming from a very small base ... there is a lot of low-quality property on the market there - especially in the office market."
He also said that Cambodia has not yet attracted high-end commercial real estate to add value to the sector.
"The Cambodian market is a lot smaller [than Vietnam] - the Cambodian market as a whole is about half the size of Ho Chi Minh City alone, so the number of transactions is low...Cambodia is still very much a an emerging market," he said by telephone.