Cambodia’s mortgage rates slide as housing sector booms

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Current interest rates for home loans range between four and eight per cent. Hong Menea

Increasing housing development projects in Cambodia and growth in their demand over the past few years have led to the Kingdom’s financial institutions introducing more attractive mortgage interest rate policies.

Current interest rates for home loans range between four and eight per cent per year on average, falling from the previous 10-12 per cent range five years ago, Canadia Bank Plc chief finance officer Ou Sophannarith said.

He told The Post on Tuesday that competition for mortgage loans in the banking sector is a plus for consumers.

“Customers can afford to buy a house to live in rather than renting, and the banks’ interest rates are reasonable,” said Sophannarith.

He said interest rates provided by the banks on deposits and savings also influence the interest rate for home loans.

“Deposit interest rates in Cambodia are currently higher than those of neighbouring countries, so a decrease in these rates will cut revenue to the banks and they will be able to offer mortgage credit at a discount,” he said.

Sophanarith said his bank offers a deposit rate of 4.5 per cent per annum and can vary depending on the size of the customer’s deposit.

Although interest rates for mortgages are very competitive, there is no risk in the banking sector, he said.

“I think the banking system is healthy . . . because of our good economic situation and the growth of large bank reserves.

“Mortgages continue to rise. We see married couples looking for new homes, instead of renting,” he said.

Chip Mong Commercial Bank Plc offered a 3.99 per cent interest rate on housing loans for the first year and 7.7 per cent for the second year.

However, the offer is only valid for those who buy homes in housing development projects operated by Chip Mong Land, the property development arm of the bank’s parent company Chip Mong Group Co Ltd, according to the bank’s Facebook.

Shinhan Bank (Cambodia) Plc offered a 4.49 per cent mortgage loan rate for the first year for payments in Cambodian riel and 7.45 per cent for the second year. It offered 4.99 per cent for the first two years for payments in US dollars, and 7.45 per cent for the third year.

A Credit Bureau Cambodia report shows a 36 per cent quarter-on-quarter fall in mortgage loan applications in the second quarter of this year.

The report showed that the total consumer loan balance in Cambodia reached $7.16 billion at the end of June this year, of which home loans amounted to around $3 billion.

As of the first half of last year, the total mortgage value was more than $2.5 billion, according to report.

Cambodia Post Bank Plc CEO Toch Chaochek said the current interest rates offered by the banks are suitable for customers.

“An interest rate of eight per cent per year is a reasonable rate for borrowers, who can afford to buy a good house and still be able to pay it back,” he said.

Cambodian Valuers and Estate Agents Association president Chrek Soknim said competitive interest rates in the banking sector are a boon for consumers.

“When home loan interest rates are competitive, the rates will go lower, making them [loans] more affordable,” he said.

He noted that mortgage applications have seen a marked increase over the last few years. The increase “will drive growth in the sector and give people a chance to buy more properties”, he said.

According to a book titled Phnom Penh 2030s – 10 Predictions for the Real Estate Sector, which was studied and compiled by VTrust Appraisal, the supply of flats is set to increase by 450,000 units and condo supply by more than 300,000 units between 2000 and 2030.