Sihanoukville property prices double, but is it a bubble?

Topping out? Some investors believe Sihanoukville’s real estate market has overheated.
Topping out? Some investors believe Sihanoukville’s real estate market has overheated. Vandy Muong

Sihanoukville has seen property prices skyrocket in recent years as Chinese investors pile in to the real estate market in the seaside resort. That’s good for the owners of real estate, but some wonder if a price correction might be on the way.

The port city, with its beaches and growing casino sector, has benefited from added infrastructure and is now a bustling resort with more visitors arriving each year. Developments at the port itself, the nearby special economic zone, and the airport have added much to the city’s economic activity. Local officials believe property prices may have plateaued.

Sihanoukville governor Yun Min said that due to the increase in the visitor numbers, Sihanoukville is enjoying rapid development and a rise in land and real estate value, which he says has doubled in the last 12 months. In some places, land values are quadruple what they were just a year ago. “Sihanoukville has gained many Chinese residents and tourists in these last few years.”

However, he added, “Land values in this province will be stagnant in the near future, and I sincerely implore those with money to come and invest in hotels, since the province is in great need of additional hotel rooms for guests to stay in.”

Economic experts have long held Sihanoukville as a province with great potential, as there has been major infrastructure and telecommunications investment. This includes expansions to the port and special economic zone (SEZ), which is now the biggest in the country with 110 factories employing 16,000 people. More and more people are using the airport, too, which now offers direct flights to a range of destinations, particularly Chinese ones.

A total of $310 million has been invested in recent years. Min believes the city will soon surpass Siem Reap as an economic centre because of its diversified activities, which include brewing, garment manufacture, and shoemaking. He said, “I firmly believe that about five years in the future, Sihanoukville will surpass Siem Reap due to its diverse potential, while Siem Reap will mostly depend on its tourism potential.”

Nuon Rithy, the CEO of Khmer Foundation Appraisal, stated that, due to the influx of foreign direct investment, the city is improving at a rapid pace. This is particularly true in its real estate sector. Some land in the Otres area has increased in value over the last year from $400 to $800 per square meter, while the value of the area adjacent to the coasts has shot up from $800 per square meter to $1,200 or even $1,500 per square meter.

Offices and houses for rent have also enjoyed an increase two-fold, due to rising demand from Chinese nationals. Nuon Rithy said, “Sihanoukville is like an unpolished gem, with its potential yet to be fully realized.” He added, “This province will become a manufacturing centre and distribute products to various neighboring countries.”

Lao Heng, an investor in a hotel in Sihanoukville’s Ochheuteal area, warned that the hotel sector in the city is falling behind relative to demand. “There are more air travelers, but the hotel industry is still lagging behind.” He said many casino/hotels require residents to gamble on the premises in order to qualify for a room.

Lao Henghas partnered with Chinese investors to convert his hotel into a casino, but believes that the local real estate sector is overheating. “Land values in the province have indeed shot up, but it’s more of a mass hysteria and is likely to turn out as a bubble, since there are no signs of significant development flow.”

Heng continued, ”If investors aim to shape this city into something like Macao and focus on sustainable development, then it’s a good thing.” Sihanoukville currently hosts 19 working casinos, with that figure set to rise to 28 in the near future.

He added, “Presently, there are about 4,000 Chinese residing in the province as well as an increase in the number of Chinese tourists coming in, but there’s not yet any concerns regarding security or order.”

However, tensions between the hundreds of Chinese construction workers in the city and their Khmer counterparts have been known to bubble over. Up to 50 Chinese construction workers have been arrested in recent months in violent incidents.