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Bad news for real estate industry

Sok Chan / Khmer Times Share:
Phnom Penh’s real estate industry currently in the doldrums. KT/Tep Sony

As the COVID-19 pandemic continues to affect Cambodia’s real estate industry, the economic fallout from the second quarter’s disruption is yet to be fully realised, according to report by CBRE Cambodia.

CBRE, which describes itself as the foremost property consultant in Cambodia, said that rent and prices across most sectors continue a negative trajectory. The real estate in Q2 2020 has been hit notably compared with Q1 2020, with the affects in adjusted rental rates and sale prices,” the report added.

It noticed that both the hospitality and retail sectors have been negatively hit further this quarter with much of the demand falling away strongly. Locally driven markets, including the land investment market and landed property segment, remain the most active.

The report also stated that land values have been on the rise within the inner city over the past six years. Values of land price along roads such as Street 2004 and Veng Sreng have become too high to accommodate industrial use. Hence, industrial locations have been moving further out of Phnom Penh.

Locations such as National Road 3, National Road 4 and Ring Road 3 have become the new centres of industrial and logistics real estate. These roads provide good connectivity to the main import and export hubs in the country.

Overall, land prices in Phnom Penh remained broadly flat during Q2. Price discovery in the segment is difficult because of a dearth of transactions.

However, the high-end condo sales price dropped around $3,041 per square metre, while prime office rents decreased to $25.5 per square metre, and prime retail mall rents down to $36.95 per square metre.

Cambodia also saw a fall of the inflow of foreign direct investment (FDI) in real estate. It had fallen significantly, according to the semi-annual report of the National Bank of Cambodia (NBC). FDIs inflow into real estate fell 24 percent, hotels and entertainment projects 25 percent and construction was -8 percent.

Ann Sothida, managing director of CBRE Cambodia, said that although there was the impact of real estate from COVID-19, there were no properties forcibly put on the market – it was just a slowdown in transactions in Phnom Penh and some areas across the country.

She added FDI dropped significantly and some investment projects carried on from 2019 were delayed because investors wanted to see the market conditions during COVID-19.

Sothida recommended whether it is a good time to sell, purchase or stock properties during COVID-19. She said it depends on the properties. For example, if there is no infrastructure or new development occurring near the properties, it is difficult to push the price up during the pandemic.

She pointed out that under supply and demand, when there is more supply, the price will be stable.
“They [investors] have to think whether their properties are at risk or they can get an opportunity to increase the price. If it is at risk, they should sell out,” Sothida said.

Po Eav Kong, chief executive officer of Advance Real Estate, said the real estate sector has been notably affected by COVID-19. Although the growth of construction development projects in the first half of 2020 was the same as the end of last year, the sales, purchasing and transactions in property slowed down in the first half of 2020.

“In general, transactions on the sales and purchasing of properties in the first six months of 2020 compared with the same period last year dropped because of cash flow with some investors reserving cash for other business; investment in the real estate sector was the second option,” Kong said.

“For the moment, we are seeing a slowdown in the sales of land sub-division and condos. However, borey development projects near the capital saw a slight impact on sales and purchases, but prices remained stable for housing projects,” he added. “Investors should buy properties at this moment, but they must study the price and location,” he said.

Chrek Soknim, president of the Cambodian Valuers and Estate Agents Association (CVEA), said previously that the situation and activities of the real estate sector will steadily recover. Local people especially are looking  to resume transactions in both purchasing and selling property.

“So far we have not seen growth, but the sector started recovering over the past couple of months. It is quiet, but now in the capital, on the outskirts of Phnom Penh, Kep, Kampot, Preah Sihanouk and Kampong Speu provinces are starting to see transactions,” Soknim added.

“However, we do not expect it to grow like earlier this year because people are still cautious about the COVID-19 situation. However, in the next couple of months, the real estate sector will be back to normal.”

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