A construction worker prepares rebar cages for the foundation of a high-rise building in the capital’s Meanchey district last year. Heng Chivoan
While the global economic situation in 2023, including Cambodia, is showing signs of improvement compared to the pandemic years of 2020-2022, the real estate sector continues to face challenges. Industry experts suggest that this trend may persist into 2024.
According to the World Bank (WB), the Kingdom is expected to achieve an economic growth rate of 5.5% in 2023 and 6.1% in 2024, despite negative external forces.
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The WB’s growth forecast surpasses that of the Asian Development Bank (ADB), which anticipates the country’s economy will expand by 5.3% this year and 6% in the next.
Cambodia’s economic performance is intricately linked to real estate sector.
Sam Soknoeun, president of the Global Real Estate Association and CEO of Sam SN Realty, told The Post last weekend that from January to mid-October, the real estate market, particularly in Phnom Penh and provincial towns, had remained subdued in comparison to the bustling activity seen before the onset of Covid-19 in 2019. This subdued market sentiment currently prevails across all segments of the real estate sector.
Land and housing market – House/borey communities
The pace of land sales in 2023 has been notably subdued compared to the previous year, primarily attributed to several key factors – large investors, both domestic and international, have held back their investments, financial institutions have reduced lending and financing conditions have tightened.
According to experts, prime land in desirable areas, typically earmarked for high-rise developments, remains relatively expensive. However, in the absence of robust economic activity and investment, demand for land for construction purposes has dwindled.
The outskirts of Phnom Penh have witnessed a different trend this year. Here, land prices remain low, typically priced at less than $10 per square metre within a 30km radius from the city center. Trading activity in this region remains robust, driven by ongoing infrastructure development and urban expansion. In comparison to recent years, most land prices in 2023 have either stagnated or experienced a decline, particularly when compared to pre-pandemic levels.
In the housing market, the demand for single houses and gated community developments – known locally as borey – has also remained muted the past year. The propensity of investing in homes for resale purposes is nearly non-existent in the current market landscape.
Condominium/Apartment market
The accommodation sector in Cambodia faces substantial challenges, particularly due to its heavy reliance on foreign clientele before the global Covid-19 crisis. The repercussions of the crisis were more pronounced in this sector than in others. Currently, there is a noticeable decline in the number of investors and foreign tourists, when compared to pre-pandemic levels.
In response to this situation and to revitalise sales, the majority of investors in this segment have pivoted their marketing strategies towards targeting local customers. This shift has involved adjustments in construction styles, depreciation schemes and payment procedures as part of their efforts to overcome the current stagnation.
Retail space – Commercial centres and offices
These sectors, closely tied to economic growth and tourism, have seen significant impact in the past three years. Many rental areas now exhibit high vacancy rates, with a scarcity of new projects available for sale.
Kim Kinkesa, senior manager of research and consulting at CBRE Cambodia, notes that the decline in the country’s real estate sector, which began in 2019, is set to continue until the end of 2023, albeit at a reduced rate, with some segments stagnating.
She highlighted that the market for housing and condominiums has primarily been driven by local buyers, with foreign participation in buying and selling being minimal. Other segments, such as retail and office space rentals, have experienced slight declines compared to the previous year. Similar conditions are expected to persist for the remaining months of 2023.
“For 2024, the Cambodian real estate sector could see modest improvement, provided there are no new projects entering the market. This presents an opportunity for existing projects to enhance their buying and selling activities,” she told The Post.
CBRE Cambodia’s research findings for Q3 2023 indicate that prime shopping mall retail leases averaged $25.8 per sqm/month, reflecting a 6.6% decrease from Q3 2022. Prime retail podium rentals were priced at $19.2, down 1.4%, while prime high street rentals averaged $25.5, marking a 13.3% increase. The average occupancy rate in Q3 stood at approximately two-thirds of the total market space, representing a nearly 3% decline from Q2 2023.
Cambodian real estate: Late 2023 and early 2024 outlook
Looking ahead to the remainder of 2023 and early 2024, the prognosis for the Cambodian real estate market is one of continuity, with the sector drawing its momentum from the global economic recovery and the revival of international tourism. Foreign investors are anticipated to remain a pivotal force in driving the future recovery of the country’s real estate industry.
Huy Vanna, secretary-general of the Housing Development Association of Cambodia (HDAC), told The Post that investment projects, particularly large-scale high-rise buildings currently under construction, are scarce, with housing development projects primarily owned by local investors.
The decline in the country’s real estate market can be attributed to various factors, including the lingering effects of Covid-19, sluggish global economic climate, geopolitical tensions among major powers and a significant reduction in Chinese investor participation.
“The Cambodian real estate market is expected to continue facing challenges,” he said.
According to the Ministry of Economy and Finance’s Q2 economic and financial statistics bulletin, covering the period from April to June 2023, the Ministry of Land Management, Urban Planning and Construction approved a total of 826 construction projects nationwide.
This figure represents a decrease of 173 projects compared to the previous year. However, investment capital in these projects amounted to $1.475 billion, marking a substantial increase of 130.2% from Q2 2022.
