Logo of Phnom Penh Post newspaper Phnom Penh Post - Real estate market values distorted by inflated prices

Real estate market values distorted by inflated prices

Content image - Phnom Penh Post
CEO of WorldBridge Land, Sear Rithy, explains the pros and cons of real estate price growth. Heng Chivoan

Real estate market values distorted by inflated prices

“My monthly salary is $200. I save $50 per month to buy a $70,000 flat. I’ll have to save for 117 years. Yes, I can have a flat in 117 years.”

As real estate prices hit the peak in the Kingdom, this ‘troll’ post has been circulating on Facebook since last week, prompting, once again, another barrage of varied opinions from citizens and experts alike regarding the industry. Nov Sivutha, an employee of a private company whose name he wishes to keep anonymous, said he was worried about the future because his salary did not match real estate prices in the capital.

“How can I not be worried? If I want a $30,000 to $40,000 flat, I won’t be able to afford it,” he said, adding that his monthly income of $400 would not be enough to afford him a house in the next 20 years. Even if Sivutha were to have a mortgage, he would be required to have at least $10,000 for the initial down payment, and cough up almost $400 a month in repayments. He added, “If the government has a policy to develop residential estate that costs about $20,000, then middle to low income citizens will be able to afford it. However, it will still be by mortgage.”

Ly Senleap, general director of FURI Real Estate, said, “You can’t compare the price of condos and land in the city with people’s annual income. The general public can’t afford to buy them, and this trend is happening all over the world.”

“Expensive real estate spots like Koh Pich have become a commercial and modern spot already.”

Sear Rithy, CEO of WorldBridge Land, which is investing in many condo projects and residential houses for low and middle income earners in Phnom Penh, said the increase in real estate prices has both positive and negative implications.

The advantage is that the government is open to investors who are keen to develop tall buildings, making construction more viable. On the contrary, this could lead to an industry bubble.

Content image - Phnom Penh Post
Kim Heang, president of the CVEA, on the difficulty of placing real price projections. Moeun Nhean

“The price of real estate and level of income and economy are tied to the bank. If the government opens the bank industry, it will make the real estate industry develop more,” Rithy said.

He continued, “However, up until now, I don’t think the real estate industry in Cambodia has become a bubble yet. It’s not there yet,” adding, “There is some real estate along Norodom Boulevard at BKK 1 that is priced at $5,000 per square metre. That’s not the actual price when it comes to real purchasing.”

Po Eavkong, general manager of Focus Property, said in the current scenario, there are real estate owners placing unrealistic price tags on their property that don’t reflect the true market value.

According to Eavkong, there are no standards to valuing these real estate sellers because firstly, they do not consult with legitimate property companies on real market values, and secondly, there are many illegal real estate agents who contact them.

“When there are many agents contacting them, they demand twice the market price,” he said. Citing an example, Eavkong said the vast land surrounding the upcoming AEON2 Mall development north of Camko satellite city had only been $200 to $300 per square metre in 2014. However, after the announcement of AEON2’s construction, property owners began demanding $600 to $700 per square metre for their land.

“Pricing properties like this worries investors because it’s not based on the [underlying fundamental] market price.”

When asked what the government should do concerning this issue, Eavkong said the government will find it hard to intervene since they do not have laws in place for these issues. Unlike in Singapore, for instance, there is a law concerning this issue in which the Singaporean government requires property sellers to employ legitimate property valuers whereby even if a seller doesn’t manage to sell the property, there is still a tax imposed for the service. Therefore, property sellers must seek counsel from expert companies. Eavkong said some valuation work undertaken by property experts is not based on any concrete data or analysis.

“That’s why we can’t manage real purchasing data,” he said.

Kim Heang, president of Cambodian Valuers, and Estate Agents Association, said that presently it is difficult to find real property prices because most property sellers inflate the asking price that is 30 per cent more than the average projection. “We are in a free market. The price of land and residence cannot be estimated by GDP. There is no country in the world that can define the price of land and houses,” he said.

“Even if the price is high, there are still purchasers.”

MOST VIEWED

  • Angkor Wat named as the top landmark for the second year

    Travel website TripAdvisor has named Cambodia’s ancient wonder Angkor Wat as the top landmark in the world for the second year running in their Travelers’ Choice Award 2018, an achievement Cambodian tourism operators expect will attract more tourists to the Kingdom. The website uses traveller

  • New US bill ‘is a violation of Cambodian independence’

    After a US congressmen introduced bipartisan legislation that will enact sanctions on Cambodian officials responsible for “undermining democracy” in the Kingdom, government officials and the ruling Cambodian People’s Party on Sunday said they regarded the potential action as the “violation of independence and sovereignty

  • Ministry’s plan for net sparks fears

    The government has ordered all domestic and international internet traffic in the Kingdom to pass through a Data Management Centre (DMC) that has been newly created by the state-owned Telecom Cambodia, in a move some have claimed is an attempt to censor government critics. Spokesman

  • Hun Sen detractors ‘will die’

    Prime Minister Hun Sen on Wednesday said those who curse or insult him would eventually die without a plot of land to bury their bodies after being killed by lightning, suffering the same fate as those who recently died in Thmar Baing district in Koh