Phnom Penh is changing at a blinding pace, with major new residential and commercial projects set to transform the capital’s skyline within the next five years. Chrek Soknim, CEO of Century 21 Mekong Realty, one of nearly two dozen Century 21 Cambodia affiliates, sees oversupply in some segments of the property market – but no sign of a bubble forming. Speaking to Khmer Times, he explained what is driving investors to grab a piece of the city’s dynamic real estate market.
KT: What does the Phnom Penh property market look like at the moment?
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Soknim: This year, there is increasing purchasing power to buy flats, mostly concentrated in the suburbs. Mostly Cambodian people are buying flats. The reason is increased purchasing power – lots of people are coming to live in Phnom Penh to find jobs. A couple who just got married will try to buy a flat, increasing demand.
KT:What about foreign investors? What is attracting them to buy property here and what are they buying?
Soknim: Foreign investors are mostly interested in buying condominiums where they can get 100-percent ownership. With commercial buildings, foreigners form joint ventures with Cambodians.
In some of the countries in the region, property gives a very low return on investment. In Thailand, the economy is not growing enough to get a high return. In Taiwan, the return on property is only about 1 percent, while in Singapore, interest rates are very low.
But when you come to Cambodia, the return on investment is between 6 and 10 percent per year. It’s very cheap to buy into the property market and realize good returns.
KT:Is there a healthy condominium market in Cambodia?
Soknim: With condos, at the moment, I don’t think there is a good market because of the large oversupply. The oversupply is mostly in condos that cost $100,000 or more. Foreigners buy 80 percent, and 20 percent Cambodians.
[However] with condos between $30,000 and $50,000, there is an undersupply. The ownership is different – for [these cheaper] condos, they are 80 percent owned by Cambodians and 20 percent by foreigners.
KT:What impact are speculators having on the market?
Soknim: I don’t think there are many speculators in the market right now because of the 30 percent oversupply [on expensive condos]. Most of the buyers are genuine investors.
KT:With dozens of major residential and commercial projects scheduled for completion in 2017/2018, how will the market respond to the flood of delivered units?
Soknim: There is a concern of oversupply, but I think it will not be very bad in 2017. There will be more of an oversupply in 2020, because many properties are starting construction now and it will take them about five years to complete. How much of an oversupply will depend on Asean integration. If it’s strong in Cambodia, demand will come from businesspeople coming here.
KT:Are there any signs of a real estate bubble forming, like the one that burst in 2009?
Soknim: There is no bubble right now – bubbles usually happen because of speculators. The value of the property market right now is growing at pace with the economy – between 6 and 10 percent per year.
The price now is about 40 to 50 percent higher than in 2009 and it has grown at a steady rate each year since then. It’s very stable right now.