The Real Estate Market at the Beginning of 2009

The newspapers have extensively reported about the current state of the Cambodian economy, and the real estate market in particular, so there is not much left for me to report outside a few personal experiences in this sector. I would like to highlight these with five examples, with which I have been familiar as recently as February.

In general, of course, it is evident that the market is soft and buyers are far and few between. No need to look for sellers – they are out and about in abundance, but as is so typical for Cambodia, a lot of them still haven’t got it. They are asking outlandish prices that are beyond the pale. However, they are still not shy to proclaim real bargains either.

Browsing the web pages of the two most reputable real estate agents one can find there is no scarcity of high-end luxury homes for sale in Tuol Kork or Boeng Keng Kang. You could think you are in West Palm Beach in Florida, Florence, Italy, or in Nice, France, and not in Cambodia. Homes for $3.0 million to $5.0 million are no rarity. Again, are there any buyers? I doubt it very much as people will probably just hold on to their money until the situation has changed – cash has become a somewhat rare commodity these days – and no one knows when that will happen. Estimates for a 2010 recovery may seem overly optimistic.

Nonetheless, there is some activity going on, maybe not so much with the professional real estate agents but with the many smaller developers or speculators that are not in dire straits, e. g. the ones that don’t have to service bank loans, or don’t have to complete a started ambitious project and don’t know how and where to raise the necessary funds. By all accounts, banks have severely limited their heretofore already comparatively small stake in real estate financing. Those independent operators have one advantage – there are no middlemen involved, they can pass on the 3% commissions to the buyers.

One thing is clear – and this is where the chickens come home to roost – the developers that invested heavily in the so-called Cambodian flats are looking at a very dim near future – at least in my view. Back in October 2007 I counted approximately 250,000 units, either begun or in the pipeline, based on the land being cleared at that time and on a physical count. This number was reduced dramatically by project stoppages, lack of financing, and a dried-out market demand. The ones that were completed for the most part sit empty. Just drive to the airport and you will find rows and rows of flat houses waiting for buyers and occupants. But don’t just look along Russian Boulevard, look inside, e. g. those little side streets. There are literally tons of empty flats – when I have the time I will go and count them and report it here.

But what about those mega-projects? Again, started projects, like Camko City, the Bassac Villas, and the Canadia High-Rise are going ahead, though at a slower pace it seems. Planned projects like the Golden Tower, the World City seem to be on hold – at least I couldn’t see any noticeable activity in both locations; but then I am on the coast and infrequently go to Phnom Penh. All those big tourism projects - Koh Puos, Koh Rong, Ream, Otres Beach – no activity, although the bridge construction to Koh Puos is still going on. As to the island itself, we’ll see in 2010 or 2011 whether all these plans are very realistic. The last three years press releases about super-projects were released in a steady stream. Now sobering reality has set in, I guess.

In summary, all this was to be expected if you just looked at the supply-and-demand situation. It is well known that South Korean investors didn’t do much of a country study before they came in with their bags full of money, which they now transferred back to Korea in order to take advantage of the slumping Won.

Everybody is waiting for the turn-around. Going by official statistics is no help at all. Growth prediction is haphazard at best, as the recent forecasts by major institutions more than aptly demonstrate – they range from a contraction of 1% to a growth of 6%. Analysts never got it right anyway. I have been following the dollar ups and downs for 30 years now and not once had one analyst gotten it right even over the medium term, likewise with oil prices recently. So read your own tea leaves. My money is on the last quarter of 2009 and the beginning of 2010 for improvements to start showing up. How Cambodia is going to fare is anybody’s guess. If you read some snide remarks by expat foreigners and overseas Khmer one would think they are glad Cambodia is finally being hit by the recession too. I believe there is a lot of jealousy involved here. Some just can’t believe that people made so much money on their land deals; and not only the powerful.

Here is my look at a few examples:

Cambodian Flats (Ptea Leweng)

These typically go for about $110,000 to $130,000 for the three-story version (as pictured). The two-story type is offered at about $50,000 to $70,000, and a one –story apartment in either type goes for $25,000 to $45,000. One floor is normally 4 x 16 m. The ground floor is more expensive as this space can be used for a store, shop, etc.

Western-style townhouses

Korean companies usually build these. One typical example is one called Vogo Village near the airport. Selling prices range from $89,000 for the smaller house (6 x 16 m) to $115,000 for the larger house (7 x 16 m). The property comes with 24/7 security.
The distinct feature is that these houses have two real floors, as opposed to the Cambodian Flat, which has this mezzanine half-floor – which usually is bedroom with a low ceiling. This is a nice and clean small community, set back about 500 m from road number 4 to Sihanoukville.

Bassac Villas

These are top of the line townhouses and villas. The villas all feature a very small lot but this is prime land right on the river, although most of them won’t have a view of it, as they are set back too far. Additionally, the condo buildings going up right now will obstruct the view. The villas go for about $300,000 and offer about 300 m2 of living space. The townhouses as pictured sell for about $200,000 to $300,000.




Phnom Penh Thmey Developments

This site developer offers lots at $140/m2, with an option to have the house built at $35,000 for the ground floor. The whole site comprises 94 lots, of which about half are sold already, and a few houses are under construction. It's located off Hanoi Road. Business has picked up these last few weeks.

Stung Hao Development

A Khmer developer has three ha parceled into 600 m2 lots. It is located at the junction of the road from Sihanoukville to Stung Hao and Stung Hao to Veal Ren. A corner lot sells for $12,000 and a middle lot sells for $10,000. A new port is being built across the main road to Sihanoukville. The developer is probably banking on this project. This looks like a good investment for people who only have a little money and can wait 2 or 3 years for this region to grow. (Not much to see in the picture.)