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Chinese nationals on the decline in Sihanoukville?

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Kim Heang, Regional Operating Principal of KW Cambodia and CEO of Khmer Real Estate Co Ltd, discusses the link between the termination of online gambling in the Kingdom and the real estate market. Hin Pisei

Chinese nationals on the decline in Sihanoukville?

It is no secret that real estate prices in Sihanoukville have been on the rise over the last few years due to the influx of Chinese nationals.

Their arrival has brought investment in the real estate, construction, hotel and casino sectors, as well as small businesses, including street food vendors, barbers and massage parlours.

The increased presence of Chinese nationals has buoyed land, house and hotel prices. However, recent news reports have shown that rental and purchase prices have slowed down as a result of Chinese nationals departing from Preah Sihanouk province following the government’s decision to discontinue online gambling licences later this year.

What is the link between the termination of online gambling and the real estate market?

The Post’s Hin Pisei met Kim Heang, Regional Operating Principal of KW Cambodia and CEO of Khmer Real Estate Co Ltd, an expert in real estate for nearly 15 years to discuss the trend.

What do you make of the real estate market in Preah Sihanouk province over the last few years?

It rose due to the influx of Chinese tourists and investors. The rise in Chinese nationals has caused Preah Sihanouk province’s land prices to rise in tandem in an unprecedented manner almost every month over the last few years.

I would say that by the end of the first half of this year, plots of land less than 1,000sqm in size cost between $4,000 and $5,000 per square metre in the commercial area of the city, roughly the same as the land value in Phnom Penh’s Boeung Keng Kang district.

Rent ranged between $10 and $15 per square metre for small businesses, and $3-5 for larger plots of land. Most contracts were set for three to five years.

Land prices in some areas increased from $200 to $2,000 per square metre from 2014 to 2018 and continued to rise to $3,000 by the middle of this year.

What is your take on the claim that the ban on online gambling is affecting the sector?

After the government issued a directive on strengthening control of online gambling businesses in mid-August, the real estate market in Preah Sihanouk province suffered a drastic decline with the number of buyers or renters slowing down. At the same time, there is not as much construction in Sihanoukville as there was in the past.

What is the connection between the ban and the real estate market?

The ban on online gambling businesses will bring down the number of Chinese tourists in Cambodia, and when the number of guests declines, demand for accommodation, restaurants and all kinds of services will drop accordingly.

At this point, the serious impact will be on those who have loaned from banks to invest in buildings for rent. When their buildings no longer have tenants, they will be unable to repay the banks.

There had previously been concerns about the growing number of Chinese nationals coming to Preah Sihanouk province, but now people are concerned about their departure. The ban on online gambling businesses will also impact real estate in border areas, especially Bavet and Poipet towns which comprise mainly of casinos.

What measures should the government take now?

I think the government’s decision to disallow new licences for online gambling businesses is good for society. However, it also carries consequences, namely, it will scare away foreign investors from further investment in Cambodia due to the perception that the government makes rather rash decisions.

It would be ideal if the government conducted a transparent review of all of the companies’ operations by December. If a company is doing business in compliance with the law and paying the right amount of tax, they should be able to renew their licences for another year. But, if the company has a licence and is not involved in business activities (due to re-selling their licence) then the government must revoke that licence.

And by the fourth quarter of 2020, the government could review all companies that received licences in 2019 again to determine which companies qualify to continue their licences for 2021 and in doing so will give all parties enough time to prepare.

In the past, there was a similar case in the Philippines, but their government later made some adjustments to stabilise the real estate market.

This interview has been edited for length and clarity.

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