Alternatives to building High-End Condos?

Alternatives to building High-End Condos?

In a market as fiercely competitive as residential real estate, developers must launch products that match real demand in order to sell them. The question that comes into developers’ minds is what else can they develop? My answer to this question is there are alternative developments to consider during the period of an excessive market supply.

In the current market scenario, there is clear demand from people who do not want to live in a condominium but still prefer to living in the prime areas of Phnom Penh. To fill in this market gap, some developers launched low-rise villa projects. Three- to four-storey villas are becoming increasingly popular and this provides an alternative to condominium living. In terms of overall design, developers have also modified designs to meet the needs of today\'s lifestyles. They have incorporated additional amenities such as private backyards or gardens; wider frontages, private swimming pools, high ceilings in living areas, three to four car parking spaces per unit, and spacious Asian-style kitchens for heavy cooking etc. in order to draw customers to their projects.

So far, the market in Phnom Penh has seen a lot of development and supply of boreys and high-end condominiums, which are good for the upper-middle and high income households, but their prices are far beyond the reach of low and middle-lower income families. At the same time, the demand for accommodation from the low-income population in Phnom Penh is high, but the prices for most of the newly-launched freehold condominiums and landed properties have exceeded the general market affordability. Because of the majority of residential property prices are beyond low and middle-lower income families, there is the potential that future local demand will shift from buying to renting properties.

There is real demand from the lower end of the housing market. In recent months, low-cost condominiums priced at USD75, 000 or below received good responses from the market. However, these units are typically projects far from main roads and surrounded by poor environments.

On the other hand, the private and public sector should work together and pave the way for building low-cost housing, since this could generate both social and economic benefits. It enhances living standards and home ownership among first time buyer and low-income earners, and minimises the number of slum settlements. Some low-cost housing has been developed in the past few years on the outskirts of Phnom Penh, but mostly by small players.

Last year, WorldBridge and Singapore-based construction company Straits Construction Singapore Pte. Ltd signed a memorandum of understanding on building affordable housing. Furthermore, the Ministry of Land Management in Cambodia will soon build affordable housing for the low-income population.

Hopefully this will encourage more developments of smaller and more affordable housing in the market. According to Sokhun Chev from KAT Apprisal Co., Ltd, the government has confirmed its intention to build houses for lower-income households and stated that “less fortunate people will be able to stay in a better condition housing.” Chan Mlop Sokha from Sokha Law Office believes real estate prices will increase on the outskirts of Phnom Penh with the inflow of new government low-cost housing. “I think this will affect the real estate market in a positive way. It helps to increase the population in the area,” she said. 

From the property developers’ perspective, increasing land costs would make low-cost condominium projects financially unfeasible. On the buyers’ side, financial assistance should be available in the form of housing loans for those who want to purchase these homes, to ensure low-income buyers can buy at a reasonable price.

Such initiatives can properly address the housing problems for lower middle-income people, low-income people and vulnerable people.

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