IN most economies, increased lending of around 30 to 40 percent among major banks would usually point to a positive knock-on effect in the property sector.
But despite a huge rise in loans in 2010 reported last week by major lenders including ACLEDA Bank and Canadia Bank, little of this extra financing appears to have been channeled into Cambodia’s still struggling property sector which saw land values slide a further 15 percent last year, representatives from the National Valuers Association of Cambodia said last week.
Although the likes of ANZ Royal Bank began to “start pushing” mortgages again around the end of the first quarter last year, following a freeze during the worst of the economic crisis, still the extent of financing available for property remains limited. This means the sector has not benefitted from the strong rebound by the financial sector last year.
Much of the property sector in the Kingdom remains under-reliant on lenders
Lenders such as ACLEDA still only offer up to 70 percent of financing on a home in Cambodia, less than in more developed economies, and often the maximum term is only up to 10 years.
Canadia Bank, for example, still only advertises mortgages for up to eight years.
Therefore much of the property sector in the Kingdom remains under-reliant on lenders, a factor that has delayed prospects of a recovery for what is the last major segment of the economy to rebound from the slump in 2009.
Given the problems many banks experienced as a direct result of property, which in many cases led to spiraling rates of bad debt, it is unsurprising the financial industry in Cambodia has looked at the sector with trepidation.
The likes of Canadia Bank quickly found themselves overexposed to the slumping property market in the first quarter of 2009 and will be careful not to suffer the same fate again.
This is no bad thing. The Cambodian property market was badly overheated by the end of 2008 so financial sector caution in the future can help prevent a repeat of over speculation.
In the short-term though that means the property sector looks set to continue to miss out on much of the returning optimism witnessed in many other parts of the economy which remain far more attractive to lenders.
With property prices apparently hitting a trough, now is a perfect time to enter the market in Cambodia, particularly with the added recent incentive of legal foreign ownership.
The key test this year will be the extent to which the financial sector is willing to back returning buyers.