Without a doubt, Cambodia has experienced rapid economic and real estate growth over the preceding years.
With foreign direct investment (FDI) flooding into the country – promoting the swift development of core industries such as tourism, real estate and construction – Cambodia has been seen by many as a development frontier in Southeast Asia.
This potential has been realised – in particular by international developers and investors alike who have considered neighbouring Association of Southeast Asian Nations (Asean) countries such as Thailand and Vietnam before making the investment plunge into Cambodia’s real estate market.
Sopon Pornchokchai, the President of Area Agency for Real Estate Affairs in Bangkok and who has worked in international real estate research and valuation since 1982, articulated on his reasons for the investment preference: “Cambodia is still a relatively new market and therefore has the potential for an attractive return on investment compared to the likes of Thailand and Vietnam.
“For investors, it is a good idea to invest in less developed markets – such as Cambodia for high returns on investment – even though it may seem less secure due to the market still developing.
“In more developed markets such as Thailand and Vietnam, return on investment is lower than that which is seen in Cambodia,” he said.
However, although Cambodia’s market is still developing, steady economic growth can offer security to potential investors.
Rami Sharaf, a member of the International Advisory Council, APCO Worldwide, said the major attraction for foreign investors when considering whether they should invest in Cambodia is the Asean-member nation’s phenomenally steady economic growth.
Although official statistics on Cambodia’s total economic growth in 2017 have not been released yet, according to the Asian Development Bank’s updated annual economic publication, Asian Development Outlook (ADO) 2017, released in late September, predictions denoted slightly higher economic growth of 7.1 percent for both 2017 and 2018 respectively.
This is in comparison to a 6.9 percent total economic growth in 2016, which exemplifies the point made by Mr Sharaf.
Looking at the views of current international developers in the kingdom, Kevin Hsu, the CEO of Lixin Group, which has launched their first major mixed-use development CEO KT Pacific in conjunction with fellow developers KT Pacific in central Phnom Penh, said: “Cambodia is a financially liberal country and therefore the restrictions on foreign exchange are also less limited than the neighbouring countries.
“With the close relationship between China and Cambodia, Cambodia proves to have much more stable economic development than Vietnam and Thailand.”
Mr Hsu added that looking at the three nation’s respective capital cities, Hanoi and Bangkok have all reached a more mature stage with very limited return on investment.
“However, Phnom Penh is still in the earlier stages of development, therefore investors can reap the benefits of return on their investment.”
He believes taking into account major considerations such as construction costs, building material costs and housing prices, pricing in Phnom Penh is about one-third of Bangkok and half of Hanoi.
Delving further into Phnom Penh’s investment potential in comparison with other major cities within the kingdom, Mr Hsu said that compared to Siem Reap and Sihanoukville, which he believes to be more tourist orientated, that Phnom Penh is Cambodia’s administrative and commercial centre, where all major state agencies are located.
This, he believes, is a critical factor when deciding where to invest.
“There are also 31 embassies in Phnom Penh and the capital is rich in resources. Throughout history, the most successful real estate developments are all centered in the capital, therefore the risk of investing in the capital city is smaller,” he said.
Li Min, the CEO of Prince Real Estate Group (Cambodia), believes the introduction of the “Law on Providing Foreigners Ownership Rights in Co-owned Buildings” has attracted a vast amount of foreign investors and played a significant role in the real estate market’s growth.
“The overall economic development in Cambodia has shown a swift and dramatic upward trend from the year 2000,” he said. “Especially since 2010, the overall economic structure in Cambodia is undergoing a full range of adjustments, especially in the real estate market.
“At the same time, Cambodia’s basic construction and cultural environment has been continuously improved. The real estate situation in Cambodia is currently the best among the entire Asean countries,” he added.
In terms of the future development of Cambodia as a whole, Mr Li believes this will be primarily driven by the real estate industry, which will have a major effect on enhancing the quality of the infrastructure and construction sectors nationwide.
The year 2018 has officially opened its doors – after another major year for Cambodia’s real estate market, and with future optimism expressed by both market experts and major developers, it is likely that the nation’s investment potential will remain superior compared with its closest Asean neighbours.
Favourable and welcoming foreign investment laws, stable, predicted economic growth and the potential for higher returns on investment in a still-developing market are all factors which will continue to navigate the kingdom’s real estate growth through the upcoming years.
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Vat Vin is an editor @ Realestate.com.kh