Logo of Phnom Penh Post newspaper Phnom Penh Post - 'For Sale': a sign of the times for real estate

'For Sale': a sign of the times for real estate

'For Sale': a sign of the times for real estate


Leveraged developers and speculators are scrambling to offload their property in a weakening real estate market as banks move in for the kill


A "for sale" sign on a building. With values in free fall, developers need buyers fast.

With the local property market in free fall, thousands of "for sale" signs are springing up in the capital as developers scramble to dump real estate. Along major thoroughfares, posters marking "For Sale:  urgent" are marks of a property market that has gone from boom to bust.

And even with property prices down by half in some segments, a worsening economy promises to bring more selling pressure on the market, say local dealers.

"I'm worried I will not be able to sell the homes we have on offer. I badly need money to pay back my lenders," says Samnang Rithy, owner of Samnang Rithy Development.

Analysts estimate the local property market has plunged 40 percent to 50 percent since it peaked in mid-2008.

Buyers needed

Hardest hit are heavily leveraged speculators and property developers. Samnang Rithy is one of the crisis's casualties and says slow demand has left him unable to repay nearly US$1 million debt, which is due by the end of 2009.  

Another developer, Kong Vansophy, general manager of Cambodian Priority Property Investment said that homes and apartments have been difficult to offload or rent in today's tough times.

"So many developers have seen the same problem.... I am very worried about the market," he said. "No one comes to see our homes, we hope the market turns around soon."

He said that promotional campaigns have failed to generate interest for what last year seemed promising property investments.

Kong Vansophy said that developers were continuing to delay or stop projects. With debt mounting and sales down between 50 and 80 percent, he says he fears the banks are poised to confiscate his assets. Asking prices for property in Cambodia have dropped by between 30 percent and 40 percent from an historic peak in June as sales activity has dropped to almost zero, according to Sung Bonna, president and chief executive of Bonna Realty Group and President of National Valuers Association of Cambodia.  

Land broker Chea Vutha said he posted signs on Norodom Boulevard reading "Land for sale hurry up!" and "Home for sale hurry up".

However, not everyone is exposed to the slowdown, according to one developer. Su Si, Mega Asset Management, the property unit of the Overseas Cambodia Investment Corp, said that the 32-storey Canadia Bank building on Monivong Boulevard is proceeding on schedule.  

"We have had no problems because our clients have paid their bills. Our bank is lucky to have good clients," she said.

ACLEDA Bank President and CEO In Channy said his bank only had limited exposure to the real estate sector.

He added that lending to the real estate sector was limited to mortgage lending rather than development loans.

"We do not have a problem because we only have eight percent of our loan portfolio in real estate. That means we have restricted loans for real estate to around $40 million as our bank's services are almost completely focused on business enterprises," he said in a previous interview.

Buying opportunity?

But the lower prices could be a buying opportunity, according to a property expert with property consultancy CB Richard Ellis.

"If property developers are offering better deals and a better product, then [lower prices] could be an opportunity. It depends on whether they are  offering extras like lower payments or better facilities," said Naim Khan-Turk, director of research and consultancy in Ho Chi Minh City.

He said that even with more pain expected in the short term, the market is showing some bright signs.

Interest rates have fallen and inflation is slowing, leading to more activity in the property market. "With inflation coming down, banks are starting to lend.... Having said that, its going to be a rather tough market [for 2009]."