The escalation of land prices in Phnom Penh over the last few years is making it difficult for domestic investors to get a foot into the property door.
Seong Bunna, CEO of Bunna Realty Group, said land prices in the city were increasing too rapidly — from between 50 to 80 per cent in some parts — rendering certain areas out of reach for some aspiring home owners.
While prices are impacted by a large variety of factors, Bunna said land prices in some areas of Phnom Penh had got to the point where precaution was required.
However, Phnom Penh still fared favourably compared to its Asian neighbours.
“Comparing land price to citizen’s daily or monthly income is too high, but compared to other countries in Asia, land prices in Phnom Penh are low and that is because our economic and trade size is relatively small compared to those countries,” he said.
According to Bunna, Cambodia’s capital city was undergoing a rapid expansion, with the emergence of sub-cities becoming increasingly popular with consumers.
Cambodian Valuers and Estate Agents Association President Kim Heang said that a rise in land prices had a range of implications.
On a positive note, Heang said investors will profit from increased capital growth while low income earners and newly employed youth will face challenges getting their foot into the property sector because wage growth is not keeping pace with rising house prices.
He also added, “It’s like a double-edged sword in the free market where the rich get richer and the poor get poorer. Current land prices are unbelievably overpriced. They are skyrocketing.”
“This phenomenon creates an atmosphere where buyers are unsure of whether to buy and sellers are uncertain about their sale. Sellers can sell from between 30 to 40 per cent higher than market price.”
Po Eav Kong, general manager of Asia Real Estate said that generally, the price of land in Phnom Penh varies depending on locations, and whether the land is pegged for residential or commercial purposes.
For example, according to Kong, land prices in the Bassac area for the construction of commercial buildings is between $4,000 and $4,500 per square metre, and for housing construction, between $2,000 and $3,500 per square metre.
Over in BKK1, land for the construction of commercial buildings ranges from $4,500 to $7,000 per square metre and up to $4,000 per square metre for residential.
Meanwhile, land in the Toul Tompoung area pegged for the construction of commercial buildings, is worth between $3,000 to $5,000 per square metre, while land for housing costs just $1,800 and $2,500 per square metre.
Heang said that the current increase in land price far outweighed the country’s recent growth trajectory. According to Heang, Cambodia’s gross domestic product growth rate of around 7 per cent annually over recent years was eclipsed by an annual land price hike between 30 to 50 per cent.
Though slightly higher, Heang’s estimates match latest figures presented in a report from international property consultancy Knight Frank, according to which residential land prices in the country’s capital rose a dramatic 26.2 per cent from June 2014 to June 2015.
Nget Piseth, assistant to the CEO of New World, was surprised with the increase in land prices in Phnom Penh.
He said, “Land prices went up too fast and are rising because Chinese investors are pouring in. But more recently, land acquisition movement seems a bit calmer.”
A senior marketing staff member at Century21 Cambodia, who wished to remain anonymous, said the increase in land prices in high demand areas such as BKK1 and the Tonle Bassac district was leading to a decreasing number of local clientele that used to live in these areas in landed properties and villas.
“Customers who used to look for residential villas in areas with high security are becoming rare,” he said.
“We only get them once in a while, and most of them are from the elite families.
“Our second type of customers are those who are fond of living in private villas but they prefer to live away from BKK1 or Tonle Bassac, because of the increase in land price in those areas.”
According to the Cambodian Valuers and Estate Agents Association Q1 2016 land market price report, Tonle Bassac land will cost $3,000 to $4,500 a square metre while land in BKK1 is valued at $4,000 to $5,000 a square metre.