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Lagging market absorption of boreys could persist

Boreys are taking it upon themselves to offer unique and price-efficient payment schemes to potential buyers in a scramble to end the decline in borey sales.
Boreys are taking it upon themselves to offer unique and price-efficient payment schemes to potential buyers in a scramble to end the decline in borey sales. Hong Menea

Lagging market absorption of boreys could persist

A report released this week by property and asset valuation company, VTrust Appraisal, focused specifically on the state of Phnom Penh’s borey market for 2016, revealing a mixed bag of results in terms of how the industry was faring.

A highlight of the report, titled Phnom Penh Housing Market and Outlook Report 2016, was how only 51 percent of the total units launched for sale in 2016 were sold.

Of the entire borey market supply of 100,278 units, 67 percent was sold. This left a total of approximately 33,100 units unsold at the end of last year.

Content image - Phnom Penh Post

That, however, proves not a deterrence to the onslaught of units to come online this year. The report stated that 28,097 completed housing units will be adding on to the existing supply.

While the borey market enjoyed a robust sales growth of 41 percent in 2015, it fell by exactly the same percentage in 2016, “causing the housing stock figures to float high in 2016”.

Borey sales’ health started declining in mid-2016, with many developers devising new financing strategies in a bid to appeal more to prospective buyers, as reported previously by Post Property. These included monthly payments as a substitute for the usual down payment which required buyers to purchase a unit first, as well as a 30-year payment scheme which cuts out the traditional 30 to 40 percent down payment plan.

Content image - Phnom Penh Post
Indicative map of boreys by districts in Phnom Penh. VTRUST REPORT

According to the report, prospects of the borey market in 2017 are seen as slightly positive, “thanks to the popular adoption of market stimuli in which buyers are offered very flexible and buyer-friendly schemes such as minimal or zero-down payment options.”

Chrek Soknim, CEO of Century 21 Mekong, said: “These zero-down payment schemes currently operate on a small scale, so it’s fine and does not pose a risk yet. It will take another five to 10 years to reach a larger scale that would make these schemes risky to undertake.”

He affirmed that to date, these new schemes have proved successful and lured back more potential buyers.

Current market leaders are Borey New World, accounting for 20 percent – or roughly 20,300 – of the total cumulative supply of borey units, and Borey Peng Huoth which has 9,900 of the entire market supply.

Content image - Phnom Penh Post
Many boreys are not starting new projects. Hong Menea

Home prices, the report noted, will stabilise this year through to 2018, as developers put a halt on constructing new projects, seeing the snail’s pace of borey sales last year.

As of now, four percent of the finished units were unsold at the end of last year, a figure that “will increase by 2017, to some degree, if the slow rate of market absorption still persists in 2017 or through to 2018,” the report concluded.

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