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Construction raking in cash

Construction is undertaken by Chinese-owned Union Development Group inside the company’s resort area in Koh Kong’s Kiri Sakor district
Construction is undertaken by Chinese-owned Union Development Group inside the company’s resort area in Koh Kong’s Kiri Sakor district earlier this year. Sreng Meng Srun

Construction raking in cash

Foreign and domestic investment in construction projects skyrocketed in the first four months of the year, government data suggests.

Ministry of Land Management and Urban Planning data revealed last week shows total investment in new construction projects reached more than $1.4 billion at the end of April. The result represents a 300 per cent increase on the $350 million recorded during the same period last year, according to the ministry. Beng Hong Socheat, spokesman of the ministry, said Cambodia’s economic performance and “manageable” political situation were the main reasons for the impressive figures.

“This emphasised that the current political problem doesn’t affect an investor’s decision,” he said, referring to the ongoing political deadlock stemming from last year’s election.

“Improvements in the tourism sector, which have encouraged more investment in restaurants, hotels and guesthouses [is also a reason].”

Chit Uys Stevexo, CEO of VTrust Appraisal, the property valuation arm of VTrust Property, said there had been a noticeable increase in apartment and office space investments as Cambodia’s economy continues to show strength.

Cambodia is set to record another year of above 7 per cent growth in 2014, according to the Asia Development Bank’s latest forecast.

“Our economy keeps growing and so does people’s income. People have enough money now so they can buy, lease or pay by installment entire residential properties,” Stevexo said.

VTrust Property data shows some 220 apartment developments were operating during the first four months of 2014, with another 73 apartment projects under construction.

Grant Knuckey, CEO of ANZ Royal, which does not provide lending services to the construction sector, said while construction investments have grown impressively, the sector is, by nature, unstable.

“Construction and development are invariably ‘boom’ sectors in any growth cycle in an emerging market. But they will generally be extremely volatile and subject to significant corrections, which is why we don’t play there,” he told the Post.

“At the moment, I don’t think it is in the bubble territory because the amount of debt financing and leverage is still relatively low,” he said, adding, however, that construction sector finance levels were rising quickly.

“Construction finance grew around 30 per cent last year and real estate financing around 37 per cent … So I think caution is warranted”

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