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Condo developers reaping in hefty profits

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Construction costs per square metre are significantly less than what developers are selling finished products for. Heng Chivoan

Condo developers reaping in hefty profits

When condo units are priced from $3,000 to $3,500 per square metre, it is at least twice as much as an ordinary Cambodian’s annual income.

Tuy Bun, shareholder of Residence L Cambodia, which is developing condominiums for the middle-income bracket, said the price for the condo that the company is developing is priced at $1,100 per square metre.

This stems from the fact that his location is not suitable for luxury condominiums and his target customers are the locals, with a one-bedroom unit costing about $40,000.

“The construction cost is only $300 per square metre for this condominium; although this does not include the land price, and the modern designs,” Bun said.

He added, “The construction cost for shop houses are only from $120 to $150 per square metre, so developers who sell their condo units from $3,000 to $3,500 per square metre are making a huge amount of money.”

Touch Samnang, vice president of Overseas Cambodian Investment Corporation (OCIC), said the construction costs for condos in Phnom Penh are generally around $350 to $800 per square metre, depending on the quality and the type of condos that are built.

He said condos that are sold in the capital are placed at least twice as much as the construction cost.

Samnang said swings in baseline construction costs vary due to a range of factors, such as land price.

He added, “The current condo prices are high, and I think developers can lower them down considerably because although the land price for some locations are high, the construction area is ten to twenty times bigger than the land size.”

Nonetheless, Sear Rithy, chairman of WorldBridge Group which is developing The Bridge project, said in terms of developing condos, the price should reflect the buying power of the potential owners.

He added, “Condos are also categorised differently. For developments outside of the city, because they are able to buy the land at a lower price, their condo units will also be sold at a more affordable price.”

Ann Thida, director of CBRE Cambodia, said because some people’s education level is still limited, they do not understand the market well.

Hence, Thida said prospective buyers should study and understand the construction costs so that they will be able to have some basis to negotiate with condo investors and prevent developers from pricing however they deem fit, and extremely profitable.

“Condos should be priced from $1,200 to $1,500. That’s an affordable price [when] compared to people’s income,” she said.

“Developers should think about their reputation and long-term investment rather than racking up short-term profits.”

Michael Nhim, former manager of The Bay condo, said earlier this week that Cambodia appears to lack a proper system in pricing condos and houses.

When asked if condo units that are priced from $3,000 to $3,500 per square metre are too high compared to people’s annual income, Nhim said the price is relatively high compared to their income: “Who would be able to afford the units besides foreign investors and a few rich people in Cambodia?”

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