Construction will soon begin on yet another satellite city in Phnom Penh, this time worth US$1.6 billion. Most people must be scratching their heads, as there are already four similar projects totalling $4.4 billion either planned or presently under construction in the capital.
The general sense of economic optimism that drove investment before the global financial crisis seems to have returned. Perhaps that feel-good factor is what drove the prime minister this week to predict as much as 8.7-percent growth in domestic GDP for the year, a significant jump over the Asian Development Bank’s most recent projection of 6.8 percent.
The newest site, dubbed “City of the Future”, boasts of everything from a national stadium to 40,000 residential units on a 387-hectare plot on Phnom Penh’s Chroy Changvar peninsula. The development now joins Grand Phnom Penh International City, Koh Pich, Camko City and, of course, the Boeung Kak lake development as one of the capital’s real estate mega-projects. These satellite cities will add about 1,000 hectares of residential and commercial space to greater Phnom Penh over the better part of a decade or more, the Post has previously reported.
While a number of officials involved with these projects were not immediately available for comment, their speculative bet on Phnom Penh is obvious: They’re expecting the city to reach the same heights as other prosperous capitals in the region.
Indeed, National Valuers’ Association of Cambodia President Sung Bonna likened Phnom Penh now to Ho Chi Minh City and Hanoi in the 1990s, claiming Cambodia’s capital would see a similar path to growth. He pointed to both local and foreign demand for property here, saying Phnom Penh’s rising Cambodian population and an influx of international buyers would help to drive sales in these satellite cities.
He also said the resurgent economy should boost domestic incomes enough to help Cambodians afford these homes, while also drawing investment from overseas. Although he admitted the process may take “about 10 years more”.
Not surprisingly, insiders with a less bullish outlook than Sung Bonna were hard to find. But it’s worth emphasising that this is in fact a speculative bet on Phnom Penh, if not Cambodia, over the next decade.
One wonders in the very least how most Cambodians will be able to afford a home in any of these five satellite cities, as the World Bank has estimated Cambodia’s GDP per capita for 2010 was $802.
Cambodians under those circumstances may have trouble buying even the lowest-priced unit at Grand Phnom Penh International City, which at last check was $98,000. Hence, local demand may not be much of a factor.
Also, the Kingdom is still largely dependent on its exports to the United States and European Union – and will be for the foreseeable future – despite talk of increasing trade among Asian countries.
As long as the US and EU continue to struggle, Cambodia and its property market will be susceptible to any economic dips felt overseas, just as they were in 2009.
Of course, there are also the scandals weighing on both Boeung Kak and Camko City, with the latter’s major investor facing allegations of corruption in its home country of South Korea. In fact, the corruption at the heart of both of these projects may not bode well for the success of these satellite cities, and nor might the fact that Camko City has lain fallow for the better part of a year.
That said, Phnom Penh has seen exponential growth over the past decade. So who’s to say similar changes won’t be seen by 2021. A lot can happen in 10 years.
Contact Tom at [email protected].