Local property experts agree that investors in Cambodia’s residential property market can generate relatively high annual returns on their investment with figures ranging from six to 12 per cent, especially within the condominium market that attracts both locals and foreigners alike. However, not all developments are created equal, and numerous factors should be taken into consideration to help investors see positive results. While business always carries with it a certain amount of risk, Post Property spoke to three industry experts and pinpointed seven common pitfalls that investors should avoid to make sure their investment yields returns..
Saraboth Ea, managing director of MAXEM Property:
1) Developers with poor or no track records
If possible, buy from a developer with a proven track record, as seeing their previous completed projects will give a good indication of the construction quality and maintenance standards.
2) Investing in the wrong neighborhood
If buying an investment property, do as much research as you can on the current and forecasted supply, and the rental demand and market prices for units in that area. Think about whether there will be a sustainable pool of potential tenants who will rent the units and what will keep them there as far as having a thriving community to support the residents. Are there schools, universities, shopping centers, parks and other attractions that will keep people in the area?
3) Be wary of developers who are only interested in nothing else besides money
Consider who developers are targeting when selling the condos and who the actual buyers of the condos are. Local Khmer and resident expat buyers have a more vested interest in making sure the property is well maintained than overseas buyers who may only visit once a year, just to check on their investment property and collect their rental income.
4) Unpaid or increasing management fees can be a warning sign
In some cases, the developer will manage the property for the first year and sometimes subsidize a lower management fee. Later, they transfer the building management to a new company that charges significantly higher fees. In other cases, some condo owners don't pull their weight and fees are difficult to collect, especially from overseas owners. This type of scenario may drive down the value of all the units within the building.
Chrek Soknim, CEO of Century21 Mekong:
5) Be careful of where your own finances are coming from
While we estimate that condo investors would get 6 to 8 per cent of the return, some local investors use loans that have high interest rates. If your loan has an interest rate of 8 to 9 per cent, there will be no income from the investment.
6) Investigate who owns the title to the development
Sometimes there can be problem with ownership title for condo buildings. While this has not happened yet, we advise investors to properly investigate.
Ann Thida, Senior Associate Director of CBRE Cambodia:
7) Look at the future trend of supply
While the current return on condo investment is about 10 to 12 per cent a year, in the next couple years there will be more supply. When that happens, because investors have more options, returns could decrease slightly.