Phnom Penh's building industry is booming. The government estimates

that each year 40,000 people are moving from the provinces into the capital, driving

a flourishing market in suburban housing developments that looks set to change the

character of Phnom Penh. Janna Hamilton reports.

Webs of scaffolding across the city are testament: Construction in Phnom Penh is

booming.

At least 10 housing developments, such as Happiness City (above), are under construction in and around the capitol.

Five years ago the total number of building permits approved was 671. By last year

that number had jumped 46 percent, to 981. Over the same period, however, the total

number of homes being built has skyrocketed - 8,879 new home constructions approved

in 2004 compared with 1,182 houses built in 2000, a jump of more than 650 percent.

"There is a boom - it's true," according to Eric Huybrechts, an urban planner

working with the Phnom Penh municipality.

Huybrechts attributes the surging growth to investors gaining a better understanding

of the market. And while more foreign investors are undertaking both domestic and

commercial construction projects, he says the majority of money flowing into the

industry is coming from local property developers.

New housing communities outside the city center account for most of the new expansion.

The new homes are being marketed to middle class families, who are embracing the

idea of life in suburbia.

Meet the Kau family

Kau Yau, a 45-year-old airport ground-staff worker, last year moved his eight-member

family into a new, single-story home in the Tuol Kork village housing development,

in Tuol Sangke commune, Russei Keo district. The house cost $23,000, and he has since

splashed out for two extra levels.

Large, private villas are popping up all over town. One of the newest, above, is the 6,000-square-meter dream home of Madame Chhun Leang, now under construction on Norodom Boulevard.

Halfway down a paved lane with functional gutters, Yau's house is one in an orderly

row of identical homes, each with a bright blue house number painted above its entrance.

In total, the complex has more than 400 homes.

Yau stands in front of his car, which he has parked in his living room, and proudly

points out the pastel color schemes he added to the ceiling of his new dream home.

"We moved from a small flat behind Monivong Boulevard, where the road was dusty

and there were too many different people," he says. "Here our neighbors

are all office workers, professionals; we understand each other and it's safer."

As property prices in the center of the city surge, more families like the Kaus are

opting for more affordable housing in satellite suburbs on the outskirts of town.

At least 10 housing developments are under construction around the city at present.

Examples include Happiness City in Russei Keo district, Very Lucky City in Meanchey

district, and New World Two in Dangkor district.

House prices can come as low as $2,500 - for a flat in a 900-home development in

Boeng Pralit, Prek Pa commune - but according to Huybrechts, most investors are targeting

those in the middle-income bracket.

"The average price for a house is between $8,000 and $20,000," Huybrechts

says. "Generally it is around $100 to $200 a square meter, but the location

is the main difference for the land price."

The number of housing starts has spiralled upward 650 percent in the last five years.

"In the next 15 years, most of the population will be in the suburbs,"

Huybrechts adds. "Inside the four districts [of central Phnom Penh] the price

is going up, so there are exclusions of the poorest and an attraction for commerce

and offices."

This migration outward is creating opportunities for commercial investment in the

city, as well as new space for the top echelons of Phnom Penh's wealthy to empty

their bulging pockets into domestic properties.

One of the biggest private projects is a villa under construction on Norodom Boulevard,

south of the Phnom Penh International School.

The owners of Vattanac Bank, Oknha Sam Ang and Madame Chhun Leang, are building a

6,000-square-meter villa. With a total land area of 10,000 square meters, the new

home will include a 30-meter outdoor swimming pool built on a first-floor terrace.

But grand construction plans are not just for residential dreams. Sam Ang and his

wife are planning an 18-floor office building near the railway station, and Canadia

Bank is building a 26-floor office building in the same area.

According to Sung Bonna, director of Bonna Realty Group, demand for office space

in the city is growing, too. He says the current average price for commercial space

is $8 - $13 per square meter.

The Vattanac Bank, however, is planning to offer "high class" offices for

about $20 per square meter.

Making room for quality

Okhna Khaou Phallaboth, president of Khaou Chuly Group, says he is impressed with

the increasing number of buyers but is concerned that cheap housing on the market

isn't up to scratch.

Phallaboth says his company - like other large, local companies such as LBL International

and Pisnoka International Corporation - concentrates on projects that demand high

work standards in order to uphold their reputation.

"It is true we have certain commercial and technical regulations in the industry,

but not many people are following them," says Phallaboth, who employs 1,500

permanent staff.

He says he faces serious competition from the hundreds of underground contractors

- "the people on the dark side," he calls them. These companies, he says,

are unregistered, evade taxes, stay in operation for one or two years and then fold

because they are incompetent.

"Developers are hiring them [because] their pricing is much lower, but quality

has a price," Phallaboth says.

He says the government needs to enforce building regulations to improve the standards

of the industry, because without any supervision or control, some of the city's construction

will continue to be "absolutely dangerous".

Paul Redfern, director of Red Furnesse construction company, a business with 84 permanent

staff, is another advocate for higher quality.

"I can't compete with the unit rates the [underground companies] offer,"

Redfern says. "They are building three-story houses for $20,000, but the workmanship

is absolutely shite."

He says cutting corners on materials - such as skimping on the amount of cement added

to the mix - is commonplace in the industry.

Unlike years past, permits are now required for refurbishment to existing properties

- not just new construction projects - but Redfern questions how deeply either are

inspected.

"The main problem is an inspector will make an appearance at the early stages,

but never return to check the contractors have built to plan or met the client's

requirements," he says.

According to the Ministry of Land Management, Urban Planning and Construction Web

site, the Department of Construction is in charge of site inspections.

However, Huy Nara, the deputy general director of the Department of Construction,

said inspections were not Construction's responsibility and that he was unsure who

was in charge. A list of questions on this topic was sent to the Minister, but as

of press time, they went unanswered.

The Ministry's general administration office also lacked information. An office staff

member said she was "very confused" about inspectors and did not know whom

to contact about them.

Tax-free 'imports'

Redfern says that hundreds of contractors stay afloat not only because of the government's

absence of building inspections, but also because of the ease of smuggling tax-free

building products through "the filter" - the land border with Thailand

or Vietnam.

He says almost all construction materials are imported.

"Nothing is manufactured here - glass is brought in from Singapore, cement from

Thailand, steel from China and Vietnam," Redfern says. "It's impossible

to quantify how much."

He says a Chinese company attempted to operate a tile factory in Kampong Speu eight

years ago, but they miscalculated the amount of silica they had access to, and the

factory never began production.

Huybrechts offers one explanation for the lack of homegrown suppliers: Political

instability has made potential investors reluctant to commit to such a volatile market.

While the boom should continue for a while, Huybrechts predicts the market will eventually

react to future political events.

"Phnom Penh will continue to grow until 2007, but the increase will probably

stop when there are local elections in 2007 and national elections in 2008,"

he says.