Friday, August 14, 2009

June-July 2009 Observations in Cambodia

Since I am currently not living there full-time but go there every three months or so for an extended period of time I will from now on only post relevant personal experiences, observations or events during those stays.

Generally, nothing much has changed compared to my last stay in February. On the surface the hustle and bustle on Phnom Penh’s streets seems to belie the fact that there is an economic downturn. Of course, we know that a number of the garment factories have closed down, construction of new housing has come to an almost stand-still, and restaurants aren’t as busy as they used to during the boom times.

On the political scene, overseas Khmer still gripe about the iron grip the ruling party holds on every facet of daily life, the SRP still hasn’t come up with a viable alternative solution to Cambodia’s problems, defamation law-suits seem to be the favorite game of players in both the opposition and governing party, and the Khmer Rouge trial is moving ahead at a snail’s pace. Average Khmer don’t seem to care one way or the other as long as they have some semblance of livelihood.

Tourism is down 2 % the first half of the year compared to the same period last year. This statistic is somewhat misleading a the lack of tourists from countries like S. Korea are made up by Vietnamese visitors, who I would venture to say don’t spend as much as the tourists from Taiwan, Japan, or S. Korea.

Hotels except for a few niche properties in Phnom Penh are hurting, Sihanoukville is outright dead at this time of the year. But then this is the height of the rainy season.

Real Estate

Realtors state that land prices are down by up to 50 % in Phnom Penh and even more in the provinces. But there doesn’t seem to be agreement among them as some point out prices are only down 20% or 30%. I don’t know where they get their numbers, plus it seems as if they compare those proverbial apples and oranges. What about location, location, location? Prime land in the center or in Toul Kork may have come down, but this is rather hypothetical, as there is simply no trade to speak of these days. But check out the realtors with a website and search Villas or townhouses in Toul Kork. There is no scarcity of $1 million homes, or $250,000 townhouses. Two years ago the picture was pretty much the same.

But let’s use the up- and coming area of Phnom Penh Thmey and Chom Chao.

In the area of Hanoi Road those so-called Cambodian Flats (ptea le-weng) I met someone who bought a very nice two-story unit for $65,000 in 2007 – the height of the real estate boom. If you check prices with realtors and owners the going rate today is around a cool $135,000. Is that a sign of decreasing prices? (I use my Khmer friend for those inquiries so as not to get that Barang treatment.)

Land near Hanoi Road is still about $150 to $175. About 1 km in it hovers around $135/m2. About 3 km north along Okhna Thy Heng Road and about 500 m on a side road going south prices drop to $110/m2.

Then going farther south they range from $80 to 30$, depending on distance from a main paved road.

From what I know about that area prices were about the same 2 years ago and at the beginning of last year. So they haven’t risen but I can’t see any noticeable drop either.

There are hundreds, if not thousands, of lots staked out for sale and development. But trust me, development will be a long time coming. There is no paved road, no power, no water. Who wants to start a development there when there are so many unfinished projects in and around Phnom Penh?

Speaking of unfinished projects – Camko City has come to a virtual standstill, and so has Grand Phnom Penh International City. The Golden Tower is reported to have been near death but only the government’s insistent nudging, and we know what that might involve, keeps the project going, as one source familiar with the project says. So, in other words, all of them ran or are running out of money. Camko was said to be broke already. But rumors grow and spread swiftly, as we all know. Hard news on this has not been reported, maybe also at the government’s insistence?

To the interested observer all this comes as no surprise. These Koreans obviously came in spending their surplus cash on something they really didn’t seem to know too much about. They clearly didn’t know what they had gotten into. It seems as though none of those companies did a market research first, checking all the basic facts starting with the demographics of Cambodia. Who can buy all those expensive villas, condos, and estates? They are all plainly building completely ignorant of the real market conditions. Khmer companies, not wanting to leave this ‘profitable’ segment to the Koreans, followed suit, and as sure as night follows day, a good many defaulted or are defaulting on their loans because of their impaired vision. As stated before, many small independent operators and speculators are now left with plenty of land on their hands with no serious buyer in sight. But they are a stubborn lot. From my experience they won’t budge much in their pricing. This is why I really can’t understand all this talk about plummeting real estate prices – a market correction, yes, but a drastic drop to rock-bottom, no.

A sign of one developer’s megalomania can be seen approaching the site.

One can only ask, ‘What were they thinking?’ This is the not so Grand Phnom Penh International City, as you can see.

And here is a recent picture of Camko City. Not much activity there either.

Chom Chao offers a slightly different picture. What you have there are mostly Cambodian flat houses – or townhouses as we would call them.

A 2-story house in the Borey New World section near the Honda factory cost about $65,000 two years ago. Most of them can be had for about $50,000 to $60,000 these days. Some of the Eo-only houses with options to add another story go for as little as $25,000. I have even seen offers for $17,000. The usual size of such a property is 4.5 m x 16 m for the house, including common land the length is 21m. The big drawback, of course, is that it takes about 40 to 50 minutes to get downtown.

There is one very nice development close to the traffic circle. It’s called Vogos Village and was built by a Korean company. Most of the unit have been sold ranging from $85,000 to $115,000. It’s a combination of traditional Khmer style and Western townhouse. Lots of living space on two floors with about 190 m2. Quite a few of them are for resale or rent. The one problem is that it is located directly in the flight path of departing airplanes with Eastern destinations from Pochentong.

Where is all the outrage?

I came across a little story that has escaped the attention of everybody with the exception of the affected people themselves.

As with Dey Krahom and Group 78, government land that is being used by squatters has been sold or conceded to a private company, which wants to build a factory there. Precise details have not been made available. The Sangkat has now drawn up a list of people who live there. All people having resided there for more than 5 years will be assigned a new lot of land in the vicinity. Where exactly and the quality the new land is not known. But all people will stay together as a community. As it usually goes with those deals, none of the village dwellers were asked beforehand whether or not they agreed with this. We are talking about 100 or so dwellers, or around 30 families.

Speaking to some of them I heard no objections, quite the contrary, they were rather happy to get better lots than what they have now. Of course, pundits might say they make a happy face so as not upset the apple cart. Maybe, maybe not. In any case, the Sangkat for that community keeps the whole deal quiet so as not to attract people from other parts that want to get ahold of a piece of free land this way.

This little village is out of the way along a major highway, though. I wouldn’t really know about the commercial value of the land, but residential land goes for about $30/m2 in the vicinity of that area. Its location is near the junction of two highways, still within the city limits of Phnom Penh.

The very nature of this is very similar to the above-mentioned events. By definition this could be called an eviction. The authorities usually call this a relocation. The big difference, of course, is that the land there is not worth the often cited $4,000/m2 as in the Dey Krahom matter.

It just left me wondering where all those outraged Rights NGOs are. How do they learn about any such projects, and why haven’t they learned about this one? Perhaps, this is not worth pursuing as the people do agree to the relocation, or the general interest in something small like this is not that great to begin with.

After all, this would not produce any major headlines, but one could probably read about it hidden away in the middle of a paper, if at all. TV stations certainly wouldn’t bother. So can one assume now that those Rights groups don’t bother with those little stories because they are not high profile? I mean, not one rights representative has shown up in that community, for instance, to brief them on their legal rights.

Big headlines, big donations – not newsworthy, don’t bother? Is that how it works?

I won’t say where this is but I will show this picture:


Anonymous said...


Maybe we should all head to florida, prices there have really fallen by 50% and with a strong € and recovery on the horizon for the US economy, this could be a killing.

Welcome back.

franco khmer

KJE said...
This comment has been removed by the author.
KJE said...

If you want to make a killing you have to go in big time. Normally this would require major funds. And this is where the crux is; banks just don't loan the money needed for major projects. And who wants to spend their own money for projects that might take 2 to 3 years to 'mature'. The silver lining is on the horizon but people still don't have a lot of money to spend. It's not like before when they spent on borrowed money.

Anonymous said...


Just out of curiosity what is the sequel to yoor post "Just another example of the workings of some members of the upper Cambodian political hierarchy?"

And what about your friend who purchased 1 hectare of land in PP Tmei?

Interesting readings.

KJE said...

There is no follow-up on that story, which was written by a former contributor to this blog. As far as I know nothing happened to any of the participants. It looks like that Russian was duped royally but there was nothing on paper that would corroborate his story.

My friend is still developing his land in PP Thmey. It is going slowly as there are not a whole lot of buyers. He originally had 92 lots. He has about 35 or so left. But prices are pretty stable, especially as there is concrete road leading to the area.

Anonymous said...

It is interesting to follow your stories. Don't you think having investors' confidence will boost up the economic downturn? Is foreigner allowed to own a property in srok khmer? if not, why take so long to pass that laws? What are khmers leaders doing now?