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Apartment prices lose ground, vie with condo market

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As the apartment supply goes up in Phnom Penh, occupancy rates and rents go down. Pha Lina

Apartment prices lose ground, vie with condo market

With the steadily rising number of competitors in the residential property market, apartment rental and occupancy rates look to be on the decline with an increasingly saturated market, according to real estate experts.

Po Eavkong, Asia Real Estate’s general manager, said the apartment market is now contending with the condominium market, thus requiring the apartment market to step up the amenities and quality of their buildings in order to compete with the impending influx of rentable condominium units. According to him, rental rates have fallen between 5 to 10 per cent, depending on the location and condition of the apartment.

“There seems to be a small increase in the rate of apartment tenants this year, however; the number of apartments is remarkably growing compared to the actual market demand,” he said.

“It’s about time apartments and condos compete more intensively from this year on. However, if we talk about the current number of apartments, it has not yet reached oversupply.”

KFA Real Estate CEO Noun Rithy attributed the price decrease to the influx of apartments coming online at the same time.

And because some investors had not previously equipped their properties with quality materials, they set the rental fee at a low rate, while old apartments that have not been fixed or redecorated also offer low rental rates.

Rithy said the current market remains competitive when it comes to price, services offered, and quality.

“Hence, investors who do not have a long vision will face many challenges,” Rithy added, noting apartments without a rooftop pool, adequate parking, or a gym would not garner strong interest from tenants.

Eavkong explained that rental fees start at around $20 per square metre for Grade A apartments; between $10 to $15 per square metre for Grade B and between $7 to $10 per square metre for Grade C.

A study conducted by Bunna Realty Group last year stated that there had been a 35 per cent increase in the number of apartments from 2014 to 2015, with 6,000 apartment units in 2015 compared to 4,000 in the previous year.

Dit Channa, CEO of Lucky Real Estate, explained the current market dynamics.

“Since the market is still small but the number [of competitors] is escalating, more investors are investing in higher quality and offering better services to their apartments by having a pool, proper parking spaces, gym, etc,” he said, noting that several older apartments have already lost about 30 to 40 per cent of their tenants.

However, Khom Moniroth, head of Daily Realty Group, disagreed with the speculation of decreasing apartment prices.

“I haven’t seen any change related to the number of apartments’ tenants. In fact, luxury apartments in BKK 1 still have 90 to 95 per cent occupancy rates,” he said.

Moreover, Moniroth believes more investments, particularly from Japan and Singapore, are flowing into the Kingdom as the country continues to stabilise within the ASEAN Economic Community.

He refuted claims that rental fees are plummeting, but was in agreement with the general view of the apartment and condominium markets remaining very competitive.

According to global real estate consultancy, Knight Frank Cambodia’s most recent analysis of the apartment sector stated that there is no imminent threat of oversupply while “occupancy and rental prices are sure to be impacted by the sudden rise in condominium units”.

“A sudden increase in the volume of units that will become available for rent starting from 2016 could potentially see occupancies drop” in the high-end and mid-range segments, the report stated.

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