Friday, December 18, 2009

‘Tender Signs of Recovery?’

At the end of October I reported on the situation of the the real estate market as I personally see it. This year we saw a longer than normal rainy season, which aggravated the sales of properties even more. Traditionally, as we all know, sales start to pick up with the beginning of the dry season.

Although I am personally involved in Phnom Penh Thmey, as readers have probably guessed by now, I am also familiar with the situation in a number of provinces, e. g. Rattanakiri, Kratie, Kompong Cham, Kandal, Sihanouk, due my business activities or property ownership there.

Just last week I took a trip up to Rattanakiri province where I and two Khmer friends of mine started another rubber plantation last year. I was really surprised to find out that prices for prime agricultural land have risen already by about 10%. There is a lot of activity there starting new plantations. One hectare goes for around $2,200 - $2,400.

This is the ideal soil for rubber trees

All those are privately owned. Plantation owners from Kompong Cham province now expand into Rarranakiri province for lack of suitable land in Kg. Cham. But not only is there activity in the agricultural sector but also in the private housing sector. I saw quite a few new houses, villas mostly, in Ban Long being started. The airport is being rebuilt so flights can resume around the middle of next year. Recently one friend of mine sold land along road no. 78 on the outskirts of Ban Long for around $43,000/ha. How’s that for recession pricing?

The Chinese are busy building the new road no. 78 to Ban Long from the junction of road no. 7 to Stung Treng. They will use only part of the old road and follow a different way as the current bridge over the Srepok river will be converted into a dam for irrigation purposes, not for a hydroelectric power plant. That new road will be finished in 2012. I think that’s pretty good for 120 km of road. Unfortunately, I saw only Chinese engineers and truck and bulldozer drivers. The reason for that is that the previous Khmer contractor who built road no. 7 from Katie to the junction did such a shoddy job that the Chinese elected to bring in their own staff. But nevertheless, overall, this is very good for Rattanakiri province which was sort of cut off from more rapid development due to its remoteness. Hopefully, all those nature lovers won’t have to worry about the abundance of wildlife and untouched forests there and will still be able to visit pristine land for years to come.

In Kratie province, which of course is famous for its Irrawaddy dolphins near the village of Sombok, I could also find new construction of houses all over the place. Most encouraging of all is the rebuilding of road no. 308 from Chloung to Kratie town. Only 17 km of dirt road is left to be paved, and this is expected to be done by April. Using that route will cut about 80 km off your trip from Kompong Cham to Kratie.

The most amazing and in my eyes ugliest construction I have seen in a long time is being completed in Chrouy Chanvar, Kandal Province. This is supposedly for a private university. I wasn’t able to find out who is building it. That is one ugly eyesore.

Here it is from the Japanese bridge

In all its splendor

Up close

Other than that, if you saw this region 5 years ago and now, you wouldn’t recognize it. What once were fields and forests is now full of houses; I would call it semi-developed. Gone are the nice villages in the middle of the forest, gone is for the most part free access to the Mekong riverbank. But I guess that is the price of development. We have seen this everywhere, not only in Cambodia.

Some of the more unsightly sides of Chrouy Chanvar

Before I turn to Phnom Penh a brief look at Sihanoukville. There too it is mostly private housing going up. I couldn’t spot one larger project in the works. Those still seem to be on hold. Even the new private port in Stung Hao is not showing any progress. But the new oil/gasoline depot there near Phum One was completed in no time. I think it took no more than 6 months to build a jetty complete with pipeline and tanks – really amazing. Of course, here too, some beautiful piece of coastline was destroyed. I had once planned to buy one hectare of beach land across the bay. Ke Kim Yan beat me to it, while I was still trying to line up investors for an idyllic hotel resort. Needless to say, I am now glad that those plans fell through. Who wants to look at a gasoline depot in the sunset. This is also the problem with beautiful Hun Sen Beach. Those damn Sokimex and Tela depots spoil that beach and only people with a wish for certain failure would build a resort there.

Now Phnom Penh is also showing signs of renascent activity, but also mostly in the private sector, as far as I can see. People are busy building or renovating their houses, but no larger project has been begun or even continued. Famous Camko City is on hold. From what I heard the majority of the villas have been sold, but work on the towers remains idle. My Korean source tells me that Camko Engineering Ltd., or whatever their company name is, have internal problems, not only financial but on how to proceed. Grand Phnom Penh International stopped further construction altogether for lack of buyers. Although they are now landscaping the development, it still looks somewhat unfinished. That grandiose gate was a bad omen. Sometimes high-flying dreams come crashing down overnight. Maybe they should take down those horses as a first step towards a newfound modesty. Rumor has it that Hun Sen’s daughter bought into the Sky42 Golden Tower. Work there is continuing, albeit at a slower pace.

The Canadia Tower as seen from Chrouy Changvar

The first New World development was built in Toul Sanke near Camko City. I am looking for a townhouse for my kids and sort of stumbled upon that development. It is a very nice community complete with small shops; it’s gated and perhaps half the houses are inhabited. I saw a lot of for sale signs, though, which erroneously led me to believe they might come down with their prices. No dice. They are still asking from $90,000 to $125,000 for an Eo/E1 with a terrace on top. Mind you, these are town houses. In the other two New World developments, you can get a duplex for that kind of money. Well, some people are still dreaming.

Gate to a development in Toul Sanke. It's all a question of personal preference, isn't it?

That the market is finally finding its right level is, in my mind, demonstrated by a recent experience, also in the search for a home for my kids. The latest New World development is next to the Wat Samrong Andaet in Phnom Penh Themy. I was interested in a duplex there and had negotiated the price down to $90,000. The owner had two for sale; I also saw a couple of others on the same street. I was holding off, hoping to get the price down to somewhere near $80,000. So I waited a month. Now I had to find out that all these units have been sold. Originally, they all wanted somewhere in the vicinity of $110,000. I knew the developer pre-sold them for $85,000 two years ago. To me this is a sign that the market found its right level.

Another example is the development I am passively involved in. Prices for a townhouse there were $45,000 for an Eo before the recession. We went to $40,000, then to 38,000, to $35,000, 34,900, etc. There was never a lack of inquiries throughout the last year, but no sales. Now we are selling for $32,000 and we’re in business again. All our buyers are private people who buy it for their own use. There are even some overseas Khmer among them who retire and come back to Cambodia to live here.

Comparing this to the vast number of townhouse near the airport and in Chom Chao, which typically sell for $28,000, we can see that a purely residential area like Phnom Penh Thmey has a slight edge over those mass developments.

I am also showing pictures of lots that were untouched only as recently as October but now work has begun there. As can be seen, most of the land is now dry and what a difference that makes. Additionally, Hanoi Road is once more being repaved and widened; this all helps the market, or in other words, the government is in effect doing something to help the economy get out of the recession.

Click on the picture to enlarge. This is development with terms. Email me for the phone number. I am not involved in this.

If you check back to my October post you can see this lot completely under water

So is all this a tender sign of recovery? I believe it is. Private people have money to build homes for themselves; contractors have work again, laborers have work; the cycle has been re-started. It sure is not humming along yet, but it is slowly cranking up.But then I am that eternal optimist, and I wouldn’t be surprised if that 1.5% drop in GDP in 2010 as predicted by the ADB, will turn out to be a modest increase in the range of 2 – 3%. Tourism is up again in October, November, and most certainly in December. So the worst is over in my mind, but just as elsewhere the dire times for the majority of people are far from over.


phnompenhpast said...

I wasn’t able to find out who is building it.

It's the "new" Norton University building. I worked for that outfit in 2005/2006 and we had a new years party over there. They said at the time it was due to be finished the following August, so its only 3 and a half years late.

James said...

I was at Camko City this week and there was active construction on their mid-rise and high rise condominiums.

The villas and townhouses are finished already but some retail units are still being worked on.

I heard that Grand Phnom Penh's golf course is now open also.

Anonymous said...

You did a really good job about posting this article. I do like to read more about this. What the heck going on with the govt to have a legitimate property laws for foreigners to have the right to own their property in Cambodia? Why is it takes the govt fucking long to pass such a laws? We do needed to bring all kind of investments into Cambodia to build economy since we are still dawning poor compare to other countries.

KJE said...

Thanks, my friend. Why does it take so long? Well, you need to look at the big picture - who is running the government and what are their qualifications? Although the level of officials has changed positively and considerably, it doesn't compare to what you may be used to elsewhere. And don't forget how much Western governments and parliamentarians bungle up their jobs.