For the first time a Malaysian based real estate developer will presale residential property to Cambodian investors. According to Thida Ann, Senior Associate Director of CBRE Cambodia, the presale of foreign residential property is just the logical consequence in a general development asset diversification.
“We are seeing a rising trend of cross country investment within ASEAN and investors in the region are interested in every strong market,” she said.
Damansara City (DC), a luxury Malaysian property project developed GuocoLand, a Singaporean listed property development company, will be made available for Cambodian investors in a pre launch sale starting on June 27. The development, worth $700 million is scheduled to go online in 2016.
Located five kilometres from the city centre of Kuala Lumpur, the residences are currently valued at $4,600 per square metre. According to a recent Century 21 report, condos in Phnom Penh average at $1,900 per square metre. Therefore, the Malaysian property is more than twice as expensive.
This, and considering the rather promising growth rates in the Cambodian real estate market, one might wonder why Cambodian investors could have an interest to buy property in Malaysia.
Anthony Galliano, CEO of local investment firm Covenant International Management, agrees that Cambodia may be the more attractive investment option, at least in the short term, as he told Post Property.
“For property investors, Cambodia is more attractive in terms of market potential and the investment is free of currency and country risk as well as the challenges of overseas property acquisition, ownership, management and sale,” he said.
While the positive outlook is already creating incentives for Malaysian investors to invest in Cambodia, most Cambodians in return, could have even less incentives to invest in Malaysia, explained Galliano.
“The overwhelming majority of Cambodians have a comfort zone with domestic property and would be reluctant to invest in overseas properties given the unknowns, risks and challenges of ownership. Overseas property investment is likely a niche market opportunity for the super-wealthy and those who may want to own residences for their children studying or living overseas,” he said.
In fact, the approach to the Cambodian market DC Residency takes with the help of CBRE who has been appointed as the real estate agent, is rather targeted.
“Our prospective buyers are Malaysians who are based in Cambodia; groups of mixed investors consisting of Cambodians and foreigners who would like to do overseas investments; wealthy families who have children study in Malaysia; people who have business in Malaysia and wealthy Khmer people,” she said.
Other than having business interests in Malaysia or other personal reasons to buy a Kuala Lumpur luxury condo, Cambodians might also find buying property outside their local market a necessity to diversify their assets and limit risks.
“Property investors benefit from diversification which reduces risk through diversification by property type and geographic region. The benefit of potential market appreciation needs to be weighed against currency, liquidity, market, and country risk,” Galliano explained, but was quick to point out the risks in an overseas purchase.
“A real estate investment is complex. It involves purchase, ownership, tax, rental and sale, and is even more challenging if it is an overseas property. Any investor purchasing an overseas property has to weigh the benefits of diversification versus the challenges of remote, overseas ownership and management,” he said.
In terms of the Malaysian property market, the balance between risk and appreciation seems manageable.
“Capital appreciation of property in the Damansara Heights area has been consistently performing between 8 per cent to 12 per cent per annum for many years even during times of economic downturn. Hence, we expect the trend to continue for many years to come,” said Kenny Wong, general manager for marketing and sales of Guocoland.
A small minority of Cambodian investors seems to have appreciated the stable and profitable aspects of property markets in different development cycles all along.
“Cambodians have invested in other countries such as Singapore, Thailand, Australia and the United Kingdom before, but yet to invest in Malaysia. CBRE is going to introduce this project and hope we will have the positive outcome. Foreigners can own freehold property in Malaysia for both building and landed; this is the key attractive point. In addition the price in Malaysia is also more reasonable compared to other countries,” said Thida.