Construction down post-Covid

Content image - Phnom Penh Post
Construction workers at Koh Pich in the capital’s Chamkarmon district last year. Hong Menea

A total of 1,679 new construction projects were approved nationwide in the first five months of 2022, down by 150 developments or 8.20 per cent year-on-year, even after the government in November moved to allow a broader resumption of socio-economic activity as Covid-19 eased, which fuelled a rebound in trade.

The investment commitment for the projects stood at $952 million, representing a 59.5 per cent drop year-on-year from $2.35 billion. Nearly 90.77 per cent of the projects, or 1,524, were for residential developments, marking a 5.16 per cent drop from 1,607 in January-May 2021, according to the Ministry of Economy and Finance’s Socio-Economic Trends report.

Huy Vanna, secretary-general of advisory firm Housing Development Association of Cambodia (HDAC), told The Post that the Covid-19 crisis not only slowed down or stopped large construction projects, especially those owned by foreign investors, but it also dissuaded players from moving ahead with new developments.

He explained that because investments in construction are long-term commitments that require large amounts of capital, the sector cannot grow as quickly as others. The ongoing impact and uncertainty from Covid will continue to weigh on the construction sector in every country, he predicted.

“The construction sector in Cambodia will not be able to recover in the short term, especially when it comes to large and high-rise buildings owned by foreign investors. Nonetheless, for residential developments invested by locals, progress goes on as normal due to the constant demand,” Vanna said.

He opined that the Cambodian construction sector, especially the large-building segment, would begin to recover in earnest when foreign investor and tourist arrivals return to pre-Covid levels.

ERA Cambodia CEO Khorn Kungkea on July 22 commented that real estate insiders expect to see the strong inflow of foreign direct investment (FDI) within the next six months, which he said would push up demand for condominiums, especially among Chinese buyers.

He commented that the Cambodian condo market, which was historically dominated by foreign buyers, has seen a remarkable increase in local customers amid the middle-class boom witnessed in recent times, and predicted that the trend would accelerate further in the years to come.

“During [these] past four years, the majority of condo buyers via our company are Cambodians aged between 25 and 35 years old, living in Phnom Penh, and Cambodians living abroad, who bought condos as an investment,” Kungkea said.

He sees a significant surge in condo demand down the road, and speculated that Phnom Penh would emerge as a “centre for condominium supply”.

Ministry of Tourism data show that 343,464 foreign visitors arrived in Cambodia over the January-May period, up by 275 per cent year-on-year. The 2021 full-year amount had been just 196,495, falling 85 per cent versus 2020. The Kingdom had registered an all-time high of 6.61 million in 2019.

Global Real Estate Association president Sam Soknoeun remarked that although real estate transactions are “now gradually resuming”, the large-building segment needs more time to stage a meaningful rebound.

Much like Vanna, Soknoeun attributed the stagnation in the segment to the low number of investor and visitor arrivals to the Kingdom compared to the 2018-2019 period, adding that “before deciding to invest in any project, investors always survey the market and the flow of customers thoroughly first”.

In 2021, a total of 4,303 new construction projects were approved nationwide, with cumulative registered capital commitment of nearly $5.334 billion – down by 31.21 per cent year-on-year – representing a total floor area of 12.998 million square metres, Ministry of Land Management, Urban Planning and Construction data shows.