Developing areas likely to yield highest returns in property investment

Developing areas likely to yield highest returns in property investment

Cheng Kheng, Managing Director of CPL Cambodia Properties Limited.

Transaction numbers starting to increase

Tuol Kork has a higher return on investment than Beong Kang Kong

For a higher return on investment in property, one of Phnom Penh’s leading real estate personalities says people should look for developing areas and buy on the secondary market, from an individual who bought from the developer.

Cheng Kheng, Managing Director of CPL Cambodia Properties Limited, which has its headquarters on Street 306, says that while buying in a premium area like Beong Kang Kong 1 might get you a three per cent return on your investment, buying in other areas such as Tuol Kork, Tuol Tom Poung 1 near the Russian Market or the Tonle Bassac area would be more likely to earn a higher return on investment.

“Tuol Kork has a higher return on investment than Beong Kang Kong,” Cheng said.

In addition to his real estate services and property valuation company, Cheng serves is Deputy President of the Cambodia Valuers and Estate Agents Association (CVEA).

“Tonle Bassac is a good area. There are many embassies and Bassac Garden,” he said.

One unit the same size in Beong Kang Kong that costs $150,000 might only cost $70,000 to $80,000 in Tuol Kork, Cheng said.

Cheng also likes the Beong Raing area which stretches from Sihanouk Boulevard to Central Market.

“There are not many high rise buildings in that area and it is good for commercial development,” he said.

“My recommendation for a foreigner is to buy a condo, for a good investment. If you want to stay here for the long term, now even the bank can loan you some of the money. Compared to paying rent of even a thousand a month; if you get a bank loan and pay off the apartment, in five or 10 years you can own it.”

Cheng himself came from humble beginnings; born in Kampong Speu in 1972, he’s seen big changes during his real estate career.

“People want to be better: everybody, whether they are poor or rich. People need to have the direction, how to get there. Most of the poor people need help, but sometimes, like myself when I was young guy in the province, we don’t think enough about the future,” he said.

Cheng sees people starting to invent better futures for themselves, accelerated by the desire for better homes and vehicles, more consumer goods.

“People try very hard because when they come out from their villages, to the market, they can see some people with good cars, good motorbikes and that motivates them to work hard to get money. We are seeing that today,” he said.

Indications of the potential in the market place, Cheng says, are all the new developments under construction.

“If the owner didn’t believe the property market would be going up, he would not be building. We do research regarding purchasing every month. During the last few months, we can see an increase in transactions. For example, with condominiums, there’s quite a lot of activity in the market. We can feel now the market is really starting.”

According to Cheng’s study, when you buy a condominium directly from the owner of the project (the primary market) it seems to be more expensive than if you buy from someone else who bought from the developer (the secondary market).

“The primary market offers you a cheap price at the beginning, during the start of the project, when the owner needs financing, but there can be a crisis in the middle,” he said.

Cheng cited the case of a lot of projects that started in 2007 with the developers offering buyers low prices, but then the value of the properties declined during the financial crisis in 2008 and 2009.

“If they bought at $200,000 and the market went down, the value was only $150,000. Now the secondary market is attractive; they need money now,” Cheng said. “Now you can get good deals on the secondary market.If you buy now you can get an eight to ten percent return.”

Cheng says the secondary market is good because the owner bought directly from the developer when there was no complete building and the economic crisis caused people to need money back, so they might sell even cheaper prices than what they originally paid.

“The foreigners come to invest in Cambodia, they see the opportunities here, but if they cannot find good people to work with, then they have a big problem and they will talk bad about Cambodia. We don’t want that. We not only want to make money. We want to be good and stand up and this is what we plan to do. We are very honest to the customer, working good for everybody without corruption.”

Cheng’s company CPL Cambodia Properties Limited has 50 employees and has a focus on real estate services including selling, buying and renting.

Another important function Cheng sees is teaching people, both local and foreign, about the realities of the Cambodian real estate market.

“If you just came here, you will not know clearly why different owners have different ideas about price. We not only want to get low prices for our customers; we know what the market price is, we will explain why. We teach owners about the market.For example, if I sell my office here for $700,000 but next door they want $1.5 million, we see that different owners have different ideas about what they want. For me, the challenge is to teach them to understand the market. If you are the owner, you have to go by the market. We teach them about the market. A five or 10 per cent difference is okay.”

Cheng sees his job as making all the owners understand the market.

“When you need the money, you sell something. If you don’t need money, why do you sell? If you sell, you need to get money. It is a waste of time and nothing happens if you just sit on it.”

Over the years, Cheng has taught a lot of people the real estate business and many others who were formerly employed by him now have their own companies.

“CPL is like a father to a lot of local real estate companies. They were my previous staff and now they also have success.”

Part of CPL’s business is going and knocking on doors asking if people want to sell or rent their properties.

“The mentality for Cambodians is changing. Banks use my services for valuation. In one month we do 250 to 300 cases. We have a very good ethics for all of the staff and they cannot take any corruption from any of the clients. This is because we work very hard to be in this industry and study hard to get our education. It is not so easy. We want to work for our customers ethically and professionally If a customer wants a higher valuation, we won’t do it. We want to be long term in the industry so we won’t be corrupt,” he said.


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