The Covid-19 crisis – which started to wreak havoc globally in late 2019 – coupled with heightened geopolitical risks and the Ukraine conflict, continues to place considerable strain on economic stability across the world.
Nowadays, real estate is widely seen as one of the most stagnant economic sectors, with subdued property transaction levels and elevated numbers of stalled and “ghost” projects.
And Cambodia is no exception, besieged by sharp Covid-driven declines in investment inflows. Given its historically heavy reliance on foreign investment, the local real estate and construction sector is currently in a low-sentiment phase marked by a significant downturn in activity as well as selling and rental prices.
With 2023 on the horizon, Global Real Estate Association president and Sam SN Realty CEO Sam Soknoeun sat down for an interview with The Post business reporter Hin Pisei to discuss the Cambodian real estate and construction market situation in recent years and outlook for the coming year.
When exactly did the local real estate market begin to stall, given that the novel coronavirus emerged in 2019 and that the accompanying economic crisis really began to hit the following year?
In truth, the Cambodian real estate sector began to hit speed bumps even before the advent of Covid-19 in 2019, when the Royal Government banned online gambling on Cambodian soil.
This prompted foreign investors in the trade – mostly Chinese and those based in Preah Sihanouk province – to leave, leading to a slump in property transactions and rentals as well as construction work that endures to this day.
Then, when the Covid-linked economic crisis emerged in late 2019, further downward pressure was put on real estate markets across the globe, including Cambodia, with lockdown measures introduced by governments and flight cancellations reducing arrivals of international visitors and investors to near zero.
Between 2019 and early 2021, although we saw that there’d been but a little foreign investment trickling in, there was still high real estate demand from local customers who still had the means to buy properties – especially residences. And local investors still had the money to forge ahead with their developments.
However, activity was certainly not as strong as it had been prior to 2019.
But things have taken a turn for the worse for the Cambodian real estate sector, with further declines reported since mid-2021, despite the Kingdom’s recognition for its effective management of Covid.
At this point, I attribute this to two main factors: diminished financial resources among locals – especially so since mid-2021 – and fallout from the Ukraine crisis.
How has the slowdown been felt across the segments?
The effects on the Cambodian real estate market have varied a bit between segments.
For example, land transactions and prices may have fallen in major urban centres, but both are still growing in smaller urban areas and suburbs. On the affordable housing market, however, transactions remain at normal levels.
On the other hand, transactions and rentals in the commercial building, office, condominium, apartment, and high-end housing segments have been devastated, since these markets are geared towards people with higher incomes and most customers are foreigners.
How has the real estate market reacted to the government’s November 2021 pivot to a ‘living with Covid’ strategy?
Although the socio-economic situation in Cambodia has returned to more normal levels, the enduring impact on the real estate sector is still significant.
Real estate market activity at the top urban hubs will likely close the year at a mere 20 per centof the levels seen before 2019.
It’ll be a long time before we can have a good market again in the condo and high-end housing segments, as well as in Phnom Penh real estate in general.
How long will it take for the real estate sector to return to its pre-2019 form?
I think the declines witnessed in the Cambodian real estate market over the last three or four years will take between two and four years to recover to its pre-2019 growth momentum, but that’ll depend on internal and external factors – government policy being a prime example of the former.
What’s your outlook on the real estate market for 2023?
From where I stand, the Cambodian real estate sector may be in a more precarious position in 2023 compared to this year, even taking into account the possible improvements in the pandemic and Ukraine conflict.
Real estate is taking longer than other sectors to recover. Nonetheless, the Royal Government has been launching a suite of new strategies to attract more foreign investors and tourists to Cambodia. A well-performing economy will in turn help revive the real estate market.
This interview has been edited for length and clarity.