From sprawling satellite cities to high-end, luxury condo developments crowding Phnom Penh’s skyline, Cambodia’s building boom is showing little sign of abating despite some recent hiccups.

With a relatively stable government and a welcoming foreign investment climate, the slew of Korean, Chinese and other regional capital pouring into an accelerated real estate building frenzy means the Kingdom is fast shaking off its war-torn reputation.

Everyone wants a slice of the lucrative real estate pie in an emerging country boasting robust GDP growth of around 7 percent. So much so, Cambodia is now vying to build the tallest building in Southeast Asia. Spearheaded by the Thai Boon Roong Group, in conjunction with China’s Sino Great Wall International Engineering, the vision is for a 133-storey, 550-metre-high commercial project in Phnom Penh that would purportedly cost $4 billion. The grandiose Twin Trade Center in one of Asian’s poorest nations, which was scoffed at by industry professionals when the plan was first floated in 2016, is rather ambitious for a city whose current tallest building – the Vattanac Capital building – stands at 184 metres.

With backing from Prime Minister Hun Sen, Miguel Chanco, lead ASEAN analyst for the Economist Intelligence Unit, told The Post he thinks the project would be built at some point but questioned the motives behind the development.

“The increasing Chinese backing behind the Twin Trade Centre tells me that there are strong political reasons why this project will see the light of day, even if it does not make sense economically,” he said.

Even for a city on the move, it hasn’t stopped experts questioning whether the large-scale nature of the project is something Phnom Penh is ready for.

“I suspect that the basic laws of economics will ensure that the Twin Trade Center building will never be built, at least in the current configuration,” Stephen Higgins, managing partner of investment firm Mekong Strategic Partners, said.

Market naysayers have reason to be sceptical. Among the countless real estate projects propping up across the country, not all have proven successful. Whether they are causalities of faulty deals, market conditions or financing headwinds, Cambodia is not yet a sure bet when it comes to the highly speculative real estate game.

In August 2016, Singapore-listed TEHO International Co Ltd hit the pause button on its $500 million mixed-use real estate project dubbed ‘The Bay’ on the capital’s Chroy Changvar peninsula, citing unfavourable market conditions. The market condition TEHO referred to was predominately the heightened risk of imminent oversupply of condominiums, confirming the residential market had officially moved into a supply glut. With 8,000 condo units expected to enter the market by the end of 2017, and an additional 13,000 units coming online next year, the fallout of a construction boom that has been in overdrive for a good five years is starting to show.

CBRE Cambodia associate director James Hodge said residential developers now had to work harder in the face of greater competition, meaning greater discounts were on offer to attract buyers.

While condo oversupply may define the market in the short-term, Hodge noted investors were taking a long-term view when it came to Cambodia’s real estate prospects.

“Investors are encouraged by the long term prospects of Cambodia’s frontier economy, particularly the sustained rates of growth and young demographic,” Padden said.

“Risk is presently focused towards the secondary market, in particular how occupancy and subsequently rental levels will change due to increasing supply. At present these risks remain distant with newly constructed buildings seen to be letting well in the secondary market.”

While the demise of The Bay re-fuelled speculation of a looming real estate bubble, the jury is still out on whether things will soon go belly up.

“The property bubble is in the condo space, and it is still very much there. However in areas like commercial property, it is much less of an issue,” Higgins said.

As for Hodge, he believes there is always an element of risk, even more so for a country like Cambodia where the market is faced with an accelerating pace of transformation.

“In recent quarters, newly announced projects have fallen considerably from the high levels seen through much of 2015 and 2016, in addition some projects have started to reposition their offerings to widen the target market of their project or move towards the more affordable end of the spectrum.”

According to Chanco, the widening supply and demand imbalance emerging in the residential market should make developers wary about embarking on any new project in the near-term.

“Property developers should start thinking about ‘what’s next’ in the market, as opposed to simply jumping on the current bandwagon,” he said.

With Cambodia now boasting more than 1,000 new construction projects worth about $4 billion, the question remains as to what and who is financially propping up the seemingly never ending development.

According to Chanco, a lot of the activity is being propped up by the banks who are highly leveraged against property developments.

“This is arguably what I am most concerned about with regards to the developments in Phnom Penh’s property market – should it crash, banks would be significantly hit thereby affecting the economy more broadly,” he said.

“The share of bank loans to construction, real estate and mortgages combined to total outstanding loans has hit ever-increasing multi-year highs, and they now account for close to one-fourth of all outstanding loans (up from a low of 15% just a few years ago). To the NBC’s credit, the central bank has taken key steps in recent years to better safeguard the stability of the financial sector.”

With much of Phnom Penh’s French colonial architecture beginning to become eclipsed by the often under-regulated but steadfast pace of high-rise projects, the Kingdom’s transition into a modern, urban driven landscape is taking shape.

Underpinned by the steady stream of foreign investment, Dr Sok Siphana, principal attorney of Sok Siphana & Associates and an adviser to the Cambodian government, doesn’t see the flurry of real estate construction and development ending anytime soon.

“I’m upbeat about the flow of investment here. At the law firm we can feel the pulse. We have not seen a decline or a lack of interest [in property] compared to previous years and a lawyer firm is a good gauge to determine the pulse of the wider market, particularly from the quality investor.”