With an increasing number of local and international property investors fuelling Phnom Penh’s rapid housing expansion, people’s dream of owning their own home is more in reach than ever before, but the financing side of that dream is proving difficult.

Huy Vanna, secretary general of the Housing Development Association of Cambodia (HDAC), said there were around 280 property companies and individual investors in the city’s capital currently contributing to the rapid rate of residential development.

The more developers and investors at play, said Vanna, the more choices consumers had when it came to buying and investing. As for the financing side of things, he noted that the banks and microfinance institutions provided quality, tailored financing for housing purposes.

“Interest loan from banks or micro-finances are the best choice because those institutions have already done their research on people who can and cannot afford [housing loans],” he said.

Vanna, however, accepted that the rate of interest in Cambodia for loans was high compared to other countries, but said the individual had to have confidence that the interest rate repayments could be met.

“While the government and the private sector cooperate to give the lowest interest rates to the public, it is up to an individual to conduct due diligence and properly weigh up interest risks that can occur at any time,” he said.

Leang Kong, who is self employed, purchased a house in Borey Chamka Svay in the Niroth commune on National Road 1 in 2012, taking out a loan from Acleda Bank to cover 70 percent of the house, which cost $30,000 in total. The interest on the loan is 13 percent per annum over 10 years.

“I didn’t have the ability to afford the whole price of the house. I didn’t want to pay to rent someone else’s house which would cost almost the same amount as what I pay to the bank.”

He continued, “After paying the loan for five years, I realised that I paid almost double the price of the house but I had no choice at the time. Also, the borey didn’t have loans for customers so we had to get a loan from the bank.”

Kong said that the high interest rate payments on his loan sometimes put him under additional pressure because of his irregular income.

“Taking high interest from banks or microfinance institutions is a risk because the situation of the job market in Cambodia is not stable, and sometimes I worry that I may not earn enough money to pay the loan because it takes a long time to pay back,” he said.

“Although it is not a forced deal, it seems like an indirect cheat for people who don’t have much money. [Banks] should research about people’s financial background and stability of the job in the country.”

However, not every home buyer struggles with home repayments.

Samreth Nimol, an assistant accountant at Apsara TV, said: “I just bought a flat this February in Takhmao city and I decided to pay full price on the flat because I don’t want to waste money on interest.”

“When I studied the loan, I realised that if I asked for a loan from the borey or bank, I would have to pay around $500 per month for more than ten years to buy a house so I would have to pay a high interest rate – which is higher than the value of the house.”

Acleda Bank’s executive vice president and group chief operations officer, Sophon Nary, said when it comes to interest rates, the bank adopts its own policy in line with the requirements of the National Bank of Cambodia. The bank’s loans consist of an average interest rate of 12 percent, while customers have to pay 30 percent of the property’s total value before obtaining a loan, Nary said.

Also, buying a house is a major commitment, said Hoem Seiha, director of Research at VTrust Appraisal Co., adding that high interest rates of more than 10 percent were sometimes a major deterrent to first-home buyers who were usually in the early stages of their career.

According to a new research report from VTrust Appraisal titled “Cluster Landed Housing Market Report 2016 - Phnom Penh”, set to be released at the end of February, boreys’ starting cost is at an average of $35,000, while the most expensive rarely go over $200,000.

Seiha said demand for housing in Phnom Penh was strong as a result of rural migration, with the new research showing 6,000 to 9,000 units a year were needed for the rapidly rising needs of accommodation in Phnom Penh.

With demand for housing strong, Seiha noted the need for housing loans would continue to rise.

“I do hope mortgage and interest rates will decrease in the future when our economy grows,” he added.