Condo boom in Cambodia's capital driven by expat demand and a leap of faith

TEHO International

02/11/2015 21:00

* Experts say condominium oversupply in a few years is 
possible 
    * Singapore firms like Oxley building posh high-rise 
projects 
    * Foreigners account for 60-70 pct of condominium sales 
    * Cambodians prefer houses with land, many can't afford 
flats 
 
    By Prak Chan Thul and Aradhana Aravindan 
    PHNOM PENH/SINGAPORE, Nov 3 (Reuters) - High-rise apartments 
are springing up across Cambodia's capital, part of a property 
boom led by expat demand, while developers are also betting the 
country's growing middle class will shed a traditional distaste 
for "living on top of each other". 
    As once red-hot property markets like Singapore lose steam, 
frontier markets such as Cambodia are gaining more attention 
from investors, and that is helping make the construction and 
real estate industries the Southeast Asian nation's most dynamic 
engine of growth. 
    Developers such as Singapore's Oxley Holdings  OXHL.SI  and 
Teho International  TEHO.SI  are embarking on high-rise upmarket 
condominiums complete with swimming pools, gymnasiums and river 
views. Japan's Creed Group as well as Taiwanese and South Korean 
firms have jumped into the market, while local developers are 
also building, albeit mostly low-rise apartments. 
    A lack of condominiums in prime Phnom Penh areas for expats 
has led to high rental yields for investors. But some experts 
worry supply could outstrip demand in a few years unless the 
country's middle class moves away from a traditional preference 
for houses with land. 
    With an economy of only $16.7 billion, Cambodia could be 
very slow in shifting to high-rise living as its urban middle 
class, while growing, remains small. 
    "Unless there is a strong take-up by local families, there 
could well be an oversupply," said Marc Townsend, managing 
director for real estate services firm CBRE in Cambodia and 
Vietnam. 
    Property consultants note that most buyers of condominiums, 
even locals, are purchasing them for investment purposes - keen 
to rent them out and believing their value will appreciate over 
the next few years. 
    They also estimate that foreigners account for 60 to 70 
percent of condominium sales in Cambodia, spurred on in part by 
the relaxing of restrictions on foreign home ownership in 2010, 
though some limitations remain in place. 
    "While most buyers are foreigners, the trend will change 
towards Cambodians. But it may take 10 to 20 years," said Kim 
Heang, chief executive of Khmer Real Estate. 
    For the time being, the influx of foreigners over the past 
few years as multinational companies open offices is feeding 
demand. That helped the construction and real estate industries 
contribute more to GDP than the garment and footwear sector last 
year, according to the World Bank. 
    Prime residential land prices in the capital jumped 14.1 
percent in the first half of this year, the biggest rise among 
13 Asian cities in a Knight Frank research report. 
    CBRE estimates there are 48 condominium projects, both 
finished and under construction, in Phnom Penh, where total 
condominium stock is set to jump to 19,745 units by the end of 
2018, a 13-fold increase over levels seen last year. 
    Some of the most high-profile projects are being built by 
Oxley and Cambodian developer Worldbridge Land. These include 
The Peak, a 55-storey mixed-use development with two residential 
towers and a Shangri-la hotel, which is due for completion in 
2020. It follows the 45-storey The Bridge, whose residential 
units are almost fully sold - with Cambodians, Singaporeans and 
Taiwanese the top buyers. 
    Due to current limited stock, gross rental yields for Phnom 
Penh's condominiums located in prime areas are among the highest 
in the region - 10 percent versus 4-6 percent in Bangkok and 
Singapore's 2-3 percent, CBRE data shows. 
    But while $300,000 for a three-bedroom apartment may be 
cheap enough to attract potential investors like businessman 
Steven Chan, an attendee at an Oxley property launch event in 
Singapore, for many ordinary Cambodians those sums are out of 
reach. 
    "People like us don't like to live in apartments like this," 
said 31-year old Hak Hab, a cook who lives in the neighbourhood 
of a 16-storey condominium block but whose wooden home borders a 
sewage canal. 
     "These apartments are only for the very rich." 
 
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GRAPHIC: Condominium demand in Phnom Penh    http://link.reuters.com/wuw85w 
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 (Reporting by Prak Chan Thul in Phnom Penh and Aradhana 
Aravindan in Singapore; Additional reporting by Martin Petty in 
Hanoi; Editing by Edwina Gibbs) 
 ((aradhana.aravindan@thomsonreuters.com; +65 6403 5659; Reuters 
Messaging: aradhana.aravindan.thomsonreuters.com@reuters.net)) 
 
Keywords: CAMBODIA CONDOMINIUMS/