Rising middle classes set to snap up mid-range properties

Zumba class at Aeon Mall. Cambodia’s middle classes are enjoying more leisure time, but will they invest in the property market?
Zumba class at Aeon Mall. Cambodia’s middle classes are enjoying more leisure time, but will they invest in the property market? Hong Menea

Cambodia’s real estate industry is entering new waters as the Kingdom’s expanding middle classes look to get on the property ladder.

Meanwhile, canny developers are starting to target this market with a slew of new developments in the $20,000 to $60,000 range.

Ly Hour, president of the Housing Development Association of Cambodia and CEO of Borey Vimean Phnom Penh, told Post Property that the success of a housing development project depends on which target market investors and developers choose.

He said, “The success of a housing development project depends on whom investors choose as their target consumers, as well as the location of the project.

“Constructing a high-end housing project is reliant upon the location. If the location is good, then it will be successful. However, developing housing for people within the middle income bracket does not warrant a good location or an expensive plot.

“I invested in a mid-price housing development located along National Road 6A valued at $30,000 and the property is doing very well now.”

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Phnom Penh’s middle class at play: evening scene at the city’s container night market. Sahiba Chawdhary

Nuon Rithy, CEO of the property agency Khmer Foundation Appraisal, believes that Cambodia’s rising living standards are due to the Kingdom’s sturdy economy, which has seen year-on-year GDP growth consistently top seven percent. This has propelled many locals into the kind of income bracket where they can start investing in property.

Rithy said: “The increase of the middle income population has resulted in their ability to afford a house, especially houses within the middle price range. It has even made it possible for some folks to consider purchasing additional properties for their children and grandchildren in the future.

“Demand for housing, especially for those within the middle income bracket, has increased, and many new investment ventures are starting to turn their focus towards these people.”

Figures released by the Ministry of Land Management, Urban Planning, and Construction predict housing demand in the capital, cities, and provincial centres of 50,000 units per year, a total of almost a million units up to 2030. The ministry reckons the urban population will rise from 4.5 million people in 2014 (27.1 percent of the total population) to 7.92 million people in 2030 (44 percent of the total population).

An Socheata, director of CBRE Cambodia, said that the demand for suitable housing from middle-income people has risen, because the numbers of people in this bracket are also rising. She thinks the mid-range property sector is a market that investors should get into as soon as possible. “Investing in cheap and affordable housing is the right investment choice.”

Housing for people within the middle income bracket usually sits in the $20,000 to $60,000 price range. Major developers WorldBridge Group have moved into the mid-range sectors and are in the process of constructing a housing project with units tagged at $20,000 to $30,000. The project, as yet unnamed, is south of Phnom Penh in Rokarkhos comnune, Saang district, Kandal province. Other locations, such as Borey Piphup Thmey and Jet Group’s Skyland City, are also catering to this sector.

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Floor plan of a typical affordable apartment. Developers hope to sell these in large numbers to the kingdom’s newly minted middle class. Photo supplied

Hong Vannak, a professor at Phnom Penh’s University of Economy and Finance, has identified two main drivers of the kingdom’s current real estate market. First, collaborations between foreign and local investors, which can often be at the higher end of the unit price range and second, projects initiated solely by local investors, who are focused at the moment on building housing for people in the median income bracket.

Vannak added, “In developed countries the people in the middle income bracket occupy the major part of the total population, and they are the ones who can push the economy forward.

“When a country has strong economic development, the numbers of middle-class people will also increase, and that’s when demands for housing and other services also rise.”

Hong Vannak stated that, additionally, the finance industry such as banks and microfinance institutions, should try to loosen their conditions of providing credits to people, to make it even more possible for them to find a suitable residence.