Compare Listings

Phnom Pehn’s luxury condo sector looks set to face some home truths

In Phnom Penh, the sight and sound of construction often seem inescapable. As investors and developers continue to pour money into retail, residential and commercial complexes, the din of drilling, clanging and sawing serves as a reminder of the city’s unrelenting building boom.

Recent years have seen much of the money flow into high-end condominium towers, which have raised the city’s skyline and put thousands of units on the market.

But many experts believe developers and speculators may have got ahead of themselves.

There are currently 110 condo projects both finished and ongoing in Phnom Penh, with 37,570 units slated to come online by 2020, according to a 2017 report by real estate company Century 21. Since 2016, however, demand for new condos has slowed down significantly.

The report notes that only 13 percent of 13,300 new units were sold in a presale launch during the first half of 2016, compared with year-on-year sales of 18 percent in 2015 and 31 percent in 2014.

Adding to the anguish was the announcement in a CBRE Cambodia mid-year report that there was just one new launch in Q2 2017.

“Whilst there has been little fluctuation in sales prices for condominiums, some developers have started to employ increasingly commercial marketing strategies, including discounts on quoting sales prices of between 2 percent and 10 percent,” CBRE states in its analysis.


There is widespread concern about the oversupply of condo units, with fears 2018 will be even worse.

“A lot of [the properties] haven’t been finished yet so they won’t be sitting there empty, but there’s going to be a lot coming online this year and that’s when the big glut will hit the market,” Grant Fitzgerald, country manager for local realtor Independent Property Services, says. “There simply won’t be enough people to rent them.”

He adds that many of the properties have been bought by Asian investors with the aim of renting them out.

Since Cambodia limped away from the financial crisis of 2008 and its economy strengthened, Phnom Penh has emerged as real estate hotspot among Chinese and other Asian investors looking to buy a property without the onerous regulations or instability affecting most neighbouring countries in the region.

Consistent economic growth of about 7 percent and a growing middle class have drawn big international brands in retail, hospitality and real estate – from Japan’s Aeon Mall to Starbucks – providing fertile ground for developers looking to tap into a new wealthier class of urban professionals.

Between 2009 and 2010, the first generation of low-to-mid-rise condominiums entered the market with a total of 732 condominium units for sale. By the end of 2015 there were 2,836 such units. A marked shift, however, came amid a wave of building launches in 2013 and 2014, with the likes of De Castle Royal adding 414 units and setting new market standards in design and quality.

Yet the country’s high-end segment is still heavily reliant on foreign buyers, particularly from mainland China, Hong Kong, Singapore and Taiwan.

China is Cambodia’s single largest foreign investor. According to a Chinese official quoted by the state-owned news agency Xinhua, Chinese investment accounted for an estimated USD11.8 billion, or 34% of total foreign direct investment, in 2016, with that money going largely into land, property, infrastructure and manufacturing.

Ross Wheble, Cambodia country director at real estate services firm Knight Frank, said there is an oversupply in the high-end segment of the market which

Perhaps the biggest concern is that most Cambodians simply cannot afford units in the high-end segment of the market and there are not enough foreign buyers.

“It has been mainly foreign investors buying luxury condos and obviously there is a finite number of them, hence sales have slowed significantly over the last year,” Ross Wheble, Cambodia country director at real estate services firm Knight Frank, says.

“To be sustainable, the market needs to be driven by domestic demand. Developers have now shifted to more affordable projects, and we have seen increasing interest from Cambodians for units priced below USD50,000.”

In a survey of leading industry experts by local online property portal, the consensus was that the market needs to reinvent itself and focus not just on high-end developments if it is to cope with the upcoming challenges.

Kim Heang, president of the Cambodian Valuers and Estate Agents Association, was quoted as saying that developers should focus on lower income and new family markets, with new developments priced at around USD30,000 to USD40,000 rather than USD100,000 for middle class families.

“Boreys (purpose built communities) for the middle class and high-end clientele have reached their limit,” Kim Heang, president of the Cambodian Valuers and Estate Agents Association, said in the survey, adding that developers should focus on properties priced at around USD30,000 to USD40,000 rather than USD100,000.

The oversupply is also pushing down rental prices of both old residential apartments and new condominium units, according to Mara Tep, manager of Phnom Penh-based agency Rooftop Real Estate. Another factor in the impending glut is the focus by developers on appealing to Asian clientele.

“Many of the new condos have a Chinese style, which Westerners do not like,” she says. “Developers should certainly think more about adapting their style and catering to a wider variety of buyers.”

Whether it’s a change of tack architecturally or a more realistic approach to addressing demand, it seems that a change of strategy is indeed required. How long it will take for the upcoming glut to be absorbed, though, is anyone’s guess.

This article originally appeared in Issue No. 146 of PropertyGuru Property Report Magazine



Hard at it

Related posts

Property special report: Cambodia real estate buying guide

Can a foreigner own property in Cambodia? “Yes, foreigners can own property in Cambodia but...

Continue reading
by anthony

Join The Discussion