Condominium prices will fall this year as more than a dozen large projects come online, adding thousands of new units to a market beginning to show signs of oversupply, according to a new report by real estate services firm CBRE Cambodia.
Ann Sothida, director of CBRE Cambodia, said condominium prices remained stable in 2017 despite the doubling of supply, but with a surge of new units expected in the coming months prices for affordable and mid-range condominiums could start to weaken.
“The current supply of condos available on the market consists of 8,600 units, but by then end of this year 17 more condo projects, or the equivalent to 13,000 units, will be added into the market,” she explained. “Prices will fall relative to the increase of supply.”
According to the CBRE report, prices of mid-range and high-end condos are expected to drop by 4 percent and 3 percent, respectively. The steepest drop will be felt by affordable condos, a category for units that sell for less than $1,500 per square metre.
The median price per square foot on condominiums in Phnom Penh was $1,350 for affordable condos, $2,600 for mid-range and $3,200 for high-end, according to the study.
The high demand in Phnom Penh was able to absorb most of the new supply in 2017, but sales teams will feel competition intensify with the addition of 13,000 units this year.
“The occupancy rate of condos in Phnom Penh at the end of 2017 was 85 percent, but we expect it to decrease this year because there will be more supply in the market,” said Sothida.
Major projects slated for completion in 2018 include Star City with 1,697 units, One Park Residence with 1,636 units, Prince Central Plaza with 918 units, and The Bridge with 762 units.
“Oversupply will be seen in some locations but not widespread,” the report noted.
Sear Rithy, chairman of WorldBridge Land, a developer whose projects in the capital include The Bridge and The Peak, said it was too soon to say whether condo prices and rentals will fall in 2018. However, he said sales remained strong throughout 2017 and he has seen little to indicate any drop off in demand.
“Most condos are purchased by Chinese investors, which has little relevance on the [state of the] local market,” he said.
Tuy Bun, a shareholder in Residence L Cambodia, an apartment and condominium complex under construction in the capital’s Boeung Keng Kang 3 neighbourhood, said he has not seen any sign of a slowdown in sales. He said between 20 and 30 units were sold last month, mostly to Cambodians and a few Chinese buyers.
While CBRE predicts affordable condos will face the most supply pressure in 2018, Bun remains upbeat on sales prospects.
“My project focuses on the average-income class, so it is not affected by competition because there are not that many projects like it in Cambodia’s market,” he said, adding that units sell for under $30,000, averaging $800 to $1,000 per square metre.
According to a recently published study by VTrust Appraisal, a total of 160 condominium projects with 62,000 units have launched since 2007 in Phnom Penh.
Of these, 33 projects and 8,793 units have been completed, with the largest concentration in Chamkarmon district – which accounts for nearly 40 percent of all available units.