Officials hope a new sub-decree will stimulate the sector as approvals plummet
THE value of construction projects approved by the government fell 74 percent over the first five months of this year, compared to 2009, but officials hope a new sub-decree on foreign property ownership will spark an investment revival.
Lao Tip Seiha, director of the construction department at the Ministry of Land Management, Urban Planning and Construction, said Monday that the government body has approved 889 construction projects worth a combined US$271 million in the first five months of 2010.
The value of approvals was down 74.24 percent on the corresponding period for 2009, when 944 construction projects, worth $1.05 billion, were given the go-ahead.
“It’s not a good sign for the construction sector,” Lao Tip Seiha told the Post.
“There is still a downturn, caused by the world financial crisis. It is a major problem for sector,” he said.
The past two years have seen a major dip in investment for Cambodian developments.
In 2009, the government approved 1,805 projects worth $1.68 billion, compared to 2,156 schemes worth $3.19 billion approved in 2008 – an annual fall of 47.38 percent.
Lao Tip Seiha said he hopes that this year will mark an improvement.
He predicted that capital investment for construction projects will increase if the government approves a sub-decree to allow foreign citizens to own up to 80 percent of units in a property development.
The sub-decree is currently being considered by the Council of Ministers and is set to be passed within the next month.
Analysts, speaking last week, say that the sub-decree, if approved, will widen the potential market for Cambodian property sector by opening it up internationally.
It has the potential to boost foreign direct investment in real estate, they said.
“We hope that when the sub-decree is passed by the government it will push up the value of construction projects at the end of the year,” said Lao Tip Seiha. He added that the sub-decree could “attract more and more local and foreign developers to invest in constructing housing development for sale or rent”.
But according to businessmen working in Cambodia’s property market, international investors are still not confident in the strength of the sector’s recovery.
Sear Chailin, managing director of Visal Real Estate Co, said Monday that transactions for the market are “still quiet” and that investors, both foreign and domestic, remain “fearful”.
However he also described the sub-decree as a ray of hope in the beleaguered market.
“I feel confident that for the end of this year and the next year, the construction and real estate sector will be in recovery. I strongly believe in the new sub-decree,” he said.
“I think that it is the right time for developers start to invest and continue with their project developments,” he added.
He said that despite the drop in future investments, large construction projects across the capital are still under way.
However, the onset of the rainy season may have stalled some schemes, according to construction material suppliers.
A representative from Chip Mong Import Export Construction Co, which imports steel from Vietnam, Thailand and China to sell wholesale domestically, said that the price of steel has dropped this month.
Sieng Vibol, human resource manager for Chip Mong, said Monday: “The price of steel is down by between 10 to 20 percent this month, compared to last. Some construction projects have been delayed or have not started activities due to the rainy season and a lack of recovery from the crisis.”
He said he hopes that the price of construction materials will increase by the end of the year.