The influence of the Chinese is having a significant effect on the economic growth prospects of Cambodia, and in particular the real estate and construction sectors. With this in mind, realestate.com.kh spoke with property market insiders on the flow-on effects of the increased integration of the Cambodian and Chinese economies and the potential influence of recently announced capital outflow restrictions for Chinese offshore property investors with their targets on Cambodia.
The Chinese initiative, the One Belt, One Road policy, is a great step forward in regards to economic integration and new trade arrangements across the Asian region. This initiative, coupled with the existing good relationships with other Asian countries, will surely result in remarkable growth in respect to Cambodian infrastructure and the real estate sector. The country will become more attractive for both local and international investors, triggering significant local development within a span of a few years.
“If funds are directed at infrastructural developments in Cambodia, particularly roads, ports and rail, it could make Cambodia a more competitive destination for manufacturing and accelerate industrial development. This type of development would have clear economic benefits to the country, which would flow into the real estate market – particularly in areas where the infrastructure developments will take place. As an example, one can look at the recent upgrading of National Road 6, and the outward trajectory of development along that road: the housing and land prices of that area are now increasing at a very fast pace.
The Belt and Road policy is short for the “Silk Road Economic Belt” or the “21st Century Silk Road” initiative from China. Not only will it promote adherence to peaceful cooperation, openness, tolerance, mutual learning and interactive development, it will also focus on economic development, expanding employment, eradicating poverty, improving people’s livelihoods and protecting the environment. Considering the above, Cambodia’s real estate market is likely to be at a high starting point within the development and construction sectors, gaining more global attention.
China’s One Belt, One Road policy, also known as “China’s massive project”, is the strategy of the Chinese government to strengthen its economic powerhouse in Asia and all over the world. In this sense, China goes into Cambodia and Asean countries through government funding with the provision of funds to the government to build infrastructure. The impact of China’s One Belt, One Road policy on Cambodia’s real estate market therefore is likely to be positive. More Chinese investors will invest in the real estate and construction market. Lately, numerous construction companies from China have come to the Kingdom, some of which are state-owned. Considering that developers will not have to make down payments to construction companies, this will leave them with more cash flow and encourage further investments in Cambodia. Lastly, the policy will further connect China and Asean countries, giving a huge boost to the flow of goods.
China recently introduced a foreign exchange regulatory policy with the main purpose of restricting speculative foreign investments – but the Belt and Road construction project investment is not likely to be limited by this. During the Belt and Road Summit Forum on May 14-15 in Beijing, the Chinese government established that it will create major foreign initiatives within the areas of infrastructure, trade and investment, financial support, cultural exchanges and others. I personally think that due to these initiatives, the future of Cambodian real estate is not only residential, but will also involve the tourism, industrial and logistic sectors. I also believe that the completion of Dara Sakor tourism and port city will attract a significant number of tourists from many countries – as well as investors, residents and workers.
Based on my research, there have been over one trillion dollars of Chinese outbound investments. That capital flew out of China not just to Cambodia or Asean countries, but all over the world – and most of this capital landed in the real estate sector. Yet China’s new regulations restricting outward capital for international property transactions are likely to have a negative but small impact on Cambodia’s real estate market.
The government’s restriction, as far as I know, still has loopholes – meaning that despite the restrictions, people can find a way to get the money out of the country legally. As an example, investors can open bank accounts in Hong Kong and then perform a money exchange from Chinese RMB to US or Hong Kong dollars. It is through Hong Kong bank accounts that Chinese investors can send money to invest in the real estate sector all over the world. Considering this scenario, I think that the Cambodia real estate sector will not be affected severely.
Although China has introduced capital outflow restrictions for property, investments in Cambodian real estate, particularly those in retail and condominiums, would certainly not be affected. This is due to the fact that many of the building projects may be under the restricted amount line (small size investment projects) and could also be funded by local banks. Some of the larger scale projects may be affected, but surely not the smaller scale ones.
Personally, I believe that the new restrictions are not likely to have a negative influence on Cambodia’s real estate market. In the nature of an investor, especially Chinese investors, they will always find ways to circulate their capital overseas and Cambodia is currently a popular investment location choice. The restriction is only with the purpose to organise the outflow funds, but opportunity gaps will always be available for the investors.
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James Whitehead is Director of Content @ Realestate.com.kh