This reclaimed swamp is the site of Chruoy Changvar peninsula's first major housing project, Happiness City, a high-density development to be built by Kim Kang. It will consist of 300 three-level houses in solid blocks of 10, each with a frontage of four meters and 20 m deep. They will be priced from $35,000 to $60,000. There are also some stand-alone villas. Kang says he has the confidence to invest because his market research indicates people like the less polluted peninsula environment and are still only 10 minutes from central Phnom Penh. Purchase deposits seem to back his instincts. The site has been filled and consolidated and foundation piles will need to be driven down to solid ground.

The real estate market in Phnom Penh is booming, but three licensed agents the Post

spoke to said it's mainly "black market" business.

The small number of licensed, taxpaying real estate companies say for them times

are tough; only a strong rental market and property valuation work are keeping them

going.

Principals of the three largest licensed operators say they are competing with some

20 unlicensed companies and an unknown number of people they regard as opportunists.

The licence fee is one million riel and it costs $1000 to register a company with

the Ministry of Commerce.

There are only five licensed companies, the Post was told. The licensed companies

want real estate law introduced to protect them from contract ripoffs by buyers and

sellers, but believe the chance of getting any kind of legal protection is remote.

They warn people buying and selling property through unlicensed agents or private

individuals to be wary of dirty tricks, especially where large amounts of cash are

involved.

Demand for rental property has reached new heights, with apartments being snapped

up within hours of listing, and rents steadily climbing. Rent prices in Cambodia

are said to be higher than in Thailand and Vietnam.

Residential rental prices are in the following ranges: a regular apartment $200 to

$800 a month, in a complex $500 to $1500, a serviced apartment $800 to $4000. Commercial

rental space is fetching $6 to $9 a square metre per month.

Tenants are well treated compared with most Western countries; with new apartments

springing up everywhere and competition for tenants, the advantages of the current

market have swung further in the tenant's favour.

The landlord pays the agent's commission, government tax of 10 percent of the rent

per month, repairs and maintenance expenses, and will usually provide furnishings,

fittings and appliances, and cable tv.

The agent's commission is negotiable and depends on the relationship between owner

and agent, and how much upfront cash deposit the agent can persuade the tenant to

advance. Agents will always recommend the owner require at least three months rent

in advance, and say the owner will then often pay half of one month's rent as commission.

Few residential owners have insurance because the cost is high, they don't perceive

the risks to be worth it, and insurance is still new in Cambodia.

The renting agent provides a comprehensive service to the owner and tenant, including

acting as mediator in disputes and handling requests for furnishings, appliances,

bedding, kitchen utensils, etc. Some landlords are willing to meet such requests

at their expense but each situation is different, will be influenced by relationships

and will also vary between classes of accommodation.

Real estate agents say most of the good furnished houses or flats are rented by foreigners,

because it is difficult for new people to get around and view the advertised prospects,

even though they all have a For Rent sign displayed. Newcomers do not have or often

cannot afford furnishings.

Real estate agents work long hours to maintain their market position and create new

business opportunities. Theirs is generally a seven-days-a-week job, and few observe

the noon-till-2pm siesta.

Chhil Rithy (Tony), owner of PT Real Estate, started the business two years ago after

three years working for other companies.

He said that around the 1993 elections, the presence of UN peacekeepers and observers

made rent prices very high: $5000 to $6000 a month for high-class eight-bedroomed

villas.

"After the UN left, the rental market collapsed, then it dropped again in 1997

during the fighting for the city between the former coalition parties," he said.

"Now the same villa rents for $1000 to $2000. Currently rents are stable and

rising. A good mid-range apartment will rent for $200 to $300 a month.

"We rely on repeat and word of mouth business from the service provided. Neither

owner nor tenant is obliged to honour an introduction through us, but most do."

PT Real Estate signs about 140 new rental contracts a year, Rithy said. This means

the three major agencies could collectively be signing 500 contracts a year because

they have 80 to 85 percent of the market.

Sales

Rithy said when it came to buying and selling property, the market values had remained

high.

"The selling price of high-value property has stayed very high, partly because

85 percent of it is owned by people who may have many properties and are exempt from

paying property taxes. Because of their wealth they do not need to sell, so their

prices stay up and the property remains empty. This a problem in Phnom Penh and a

big problem in the provinces. The high-value property values also affect the value

of less desirable properties in the same area.

"Sales commission is paid to the agent by the vendor, 3 percent in Phnom Penh

and 5 percent in the provinces.

"Currently the sales market is very slow and we are relying on rental contracts

to support our business."

He said the most desirable areas for foreigners to live were Boeng Kang Keng 1, Daun

Penh, Toul Kok, and Tonle Bassac. These were close to the NGOs, embassies, government,

palace, river and schools. Locals liked to live close to a market, on a good road

with low crime, and have reliable water and electricity services. Wealthy locals

preferred the new housing developments for security of investment.

"Few foreigners currently buy properties here because they see the investment

climate as risky, whereas in my opinion the market is attractive for investment.

They are discouraged by only being legally allowed to own up to 49 percent of a property.

I've heard there are ways to get around this but I don't know the details."

Rithy said because there was no commission law providing legal penalties for breach

of contracts, buyers and sellers introduced through an agent could break their promise

and do a deal directly after waiting for a few weeks or months. Consequently there

was a reluctance by agents to commit to the cost of marketing properties or introducing

potential buyers.

"This way they can avoid paying commission. Some people just do not keep their

word. We licensed real estate agents depend on our honesty and integrity for repeat

business so people are better off using us in my opinion," Rithy said. "All

kinds of things can go wrong with unlicensed operators.

"We desperately need local real estate law to protect ourselves from ripoffs

and broken promises. In many other countries the real estate companies and the parties

to a contract to buy or sell are protected by very specific law, with heavy penalties

enforceable in the courts. This prevents buyer and seller bypassing the agent after

being introduced.

"What I think needs to happen is that a real estate association should be formed,

and commission law should be recognised by the government. The government should

draft the necessary legislation, including a code of practice and code of ethics."

Sung Bonna is the director of Bonna Realty, Phnom Penh's largest real estate business,

with 14 staff. This company specialises in property valuations.

He had a somewhat different opinion of the market's investment opportunities.

"The Cambodia market is always affected by the political situation," he

said. "If it's good, investment money abounds. Currently, due to the continuing

deadlock over formation of a new government, people worry about the future, and delay

making investments.

"Local people, when they have money to invest, think very carefully about the

future before making decisions. There is a serious lack of confidence. They are tending

to invest in other countries.

"In Cambodia there are no fixed rules. You cannot be certain of anything, especially

every five years when there is a new election. This is very frustrating for people

like myself who simply wish to operate a good, honest business.

"We are very busy. Property valuation is the bulk of our business. I associate

as much as possible with foreigners. I learn from them and I learn from business

friends. I always study the real estate market and business practices, particularly

in Singapore and Bangkok. I always ask questions and I learn fast. We are recognised

as good valuers and this has developed our client base."

Bonna said more people were borrowing money against their property "because

business is not so good, and this is a good time for us as valuers because they need

property valued as security.

"Surveying and appraisal is very difficult to practise in Phnom Penh. When foreigners

come to Cambodia they have no idea what property is worth, how much they should pay

per square metre, how to negotiate. I have this knowledge."

He said the sales market had dropped only 5 percent since 1993-94 after the UN left,

whereas the renting market had dropped 50 percent. Despite all of this, many new

apartments were being built, he said. But the lack of real estate law meant real

estate agents had little protection when trying to sell a property.

"It is very upsetting for me that there is no law," Bonna said. "They

can list a property with us, we introduce prospective buyers, then they can bypass

and do a deal direct. In other countries they have an agreement which the parties

must obey for a fixed period, say for three months. I make a commitment to advertise

and sell the house in exchange for a fee. This is how it should be. Here we have

no protected rights."

Why bother with a licence? "Because we are honest and professional and the large

commercial customers will only deal with licensed companies. They check my background,

they check my reputation and credibility, and they interview me personally before

they do business with me."

Cheng Kheng, managing director of Cambodia Properties Ltd, said he thought the market

would improve a little this year.

"Before 1992 the market was almost non-existent, but from the elections in 1993

until the conflict in 1996-7 it was very strong: what you could buy for $1 today

you could sell for $5 tomorrow. Then with the fighting in the city, confidence collapsed,

it declined and now it has recovered a little.

"My business has survived only because of renting agency business. There is

currently little interest in property from foreign buyers, but wealthy locals are

buying in newer areas like Northbridge. Foreigners are discouraged by the legal restriction

to 49 percent ownership. They can do joint ventures but that is more for commercial

business. Foreigners can also marry a Cambodian to obtain property title, but I don't

know how common that is.

"Locals are not generally buying residential property for investment. The renting

market is very strong and this has sustained my business."

Real estate law

"It is a big problem for us having no legal protection of exclusive contracts,

even when we have a signed agreement. We tend to do more business with people we

can trust.; but even deciding who you can trust is difficult. We can't even trust

lawyers. I have known lawyers to grab clients from me when they are preparing documents,

because they know of a property for sale and see an opportunity to earn commission.

We have built a reputation for honesty and good service," Kheng said.

Rental market

"Good houses in good areas will always rent and sell well. Rental returns have

not increased, in fact have decreased due to greater number of properties being built,

and fewer foreigner residents. The owners have more competitors, smaller margins.

A good, nice, well located, well furnished place will bring higher rents. The large

new rental house that used to cost $5000 month, is now $2500.

"I enjoy the business very much because every day we meet different people,

rich and poor. We try to do a good job for everyone. It's a very hard business, long

hours, working every weekend, not much time for golf, but very satisfying."

New subdivisions

"Many locals with money are investing in land development or buying houses in

the Northbridge area.

"Buyers are mostly local, some Khmers living in the USA and France; also foreigners

who have a Cambodian wife.

"The trend has been for people to live in the central city; four or five kilometers

away from work was once very far, but now that is changing. People have better transport

and can live further out."

He doesn't agree with Rithy's contention about wealthy people sitting on property.

"Up to three years ago there was a lot of high-priced property owned by wealthy

people, sitting empty and unsold because they didn't need to sell. That's mostly

changed now. The free market operates. People are not afraid to sell. They meet the

market. Everyone needs money."

Next 10 years

"I hope we have a good Government to deal with the challenges of a growing city.

There are many challenges to be dealt with: refuse, roads, sewage collection, the

environment in general, crime, traffic, personal safety.

"We also have the problem of people only being able to make enough money per

day to take care of immediate needs. Planning for the future is not something they

can think about. I hope this will also change. Our people are basically honest and

good-hearted. All everybody wants is to be able to do a good job for good pay, sufficient

for the basics of life."