Phnom Penh: Dawn of a new era

We look at why Cambodia is fast becoming the darling of foreign property investors.

By Romesh Navaratnarajah

There is a lot of buzz surrounding Cambodia’s real estate market these days, with swanky new condominiums being built in the capital Phnom Penh and the coastal city of Sihanoukville.

According to Cambodia-based Lotus Consulting, the kingdom is fast becoming a hot spot for foreign property investors for a number of reasons, including its warm climate, beautiful sandy beaches and friendly people. Property in Cambodia also costs less than in other Asian countries.

In Phnom Penh, there are growing business opportunities, several international schools catering to the needs of expatriates, and plenty of entertainment options, said the consultancy. Its first Grade A offices and international standard shopping mall also entered the market in 2014.

Meanwhile, household incomes continue to rise while GDP growth is projected to hit 7.3 percent this year, up slightly from 7.0 percent in 2014.

First-mover advantage

The main driver to invest in Cambodian property is the expectation of strong future capital growth. Early purchasers of off-plan condominiums in successful schemes have achieved healthy capital appreciation in recent years, with those who purchased property in 2008 able to resell their units at a premium of up to 30 percent last year.

CBRE Cambodia noted that the condominium market has great potential. In 2009, there were only 178 condo units in Phnom Penh. By 2014, that number had soared to 2,095 units and more than 9,000 units are expected to enter the market from 2015 to 2018.

Compared with the number of condo units entering mid-town and downtown Bangkok (190,000 units), Ho Chi Minh City (over 57,000 units), and Hanoi (more than 77,000 units) during the same period, the relatively low number of condo units show that there is still more room for growth, said CBRE Cambodia’s associate director Simon Griffiths.

In addition, condominiums in Phnom Penh have posted encouraging rental returns of five to seven percent, while capital growth ranges from five to 7.5 percent per annum.

What you can and cannot buy

Since the passing of legislation in April 2010, the Foreign Ownership Property Law allows foreigners to own property in Cambodia, but with certain restrictions.

Foreigners cannot buy or register their ownership of property on the ground floor or of land, revealed Lotus Consulting. However, they can own upper floor units and up to 70 percent of a freehold condominium. CBRE said the law has little impact on overseas buyers since apartments are generally not built on the ground floor.

While the process of registering for a property is not tedious, prospective buyers are encouraged to engage a translator and lawyer before going through with a deal in order to avoid any misunderstanding and to be clear on the rules and regulations, added Lotus Consulting.

 

CITY FAST FACTS
(PHNOM PENH)

• Population: Approximately 2 million

Total area: 376 sq km

Currency: Riel

GDP per capita: US$1,123 (2014)

GDP growth: 7.0 percent (2014)

Future transport: Public train service by 2020

Home prices: Up 10 to 20 percent year-on-year

Distance from Singapore: 1,140 km