2020: What and where to invest in real estate?

• 11 April 2020
• Local News
• 5945 Views

2019 has been another great year for the real estate sector in Cambodia due to increasing demand from both local and international investors. According to the Ministry of Land Management, Urban Planning and Construction (MLMUPC), a total of US$9.3 billion worth of investments came into the kingdom, spread across 4,446 approved investment projects, which represented 55% growth over 2018.

What about 2020? Early 2020 has not been going that well due to factors such as the shutdown of online gambling in Sihanoukville, the Coronavirus outbreak, the China economic slowdown, the uncertainty over the EBA withdrawal, the trade war between China and the US, widespread protectionism, and geopolitical issues around the world, among others.

Given these factors, the Ministry of Economy and Finance has recently lowered the forecast of GDP growth in 2020 from 6.5% to around 6.1%. Last few weeks, the World Bank also predicted on Cambodia’s economic growth to slow to 2.5% in 2020 due to COVID-19.

Similarly, many local experts also project that the real estate and construction sector in the kingdom would also experience a slight slowdown this year. (Read More)

Nevertheless, according to analysts, Cambodia is still one of the best places in the Southeast Asia region to invest in real estate, despite the projections of a slowdown. The most apparent example given by CBRE Cambodia is that land prices in Ho Chi Minh City, as of the fourth quarter of 2019, cost up to US$30,000 per square metre in the central district, compared to only US$6,000 per square metre in Daun Penh.

In what type of investment and which parts of Phnom Penh should one invest? 

According to Mr Sorn Seap, CEO of Key Real Estate and one of the best-known real estate analysts in Cambodia, deciding on which part of the city is the best location for investment depends on what types of properties one wishes to invest. In the past ten years, the real estate market expanded from Phnom Penh city centre to the west. While in the past five years, there was a boom and expansion to the north. Presently, the trend is moving to the south while the east side of Phnom Penh is a worthy location for future investment.

Land 

Investing in land remains the best type of investment above all if one is eligible for land ownership because the capital gain from land is very high. When investing in the right property, the capital gain can increase by up to 50% or 100%. For 2020, according to Mr Sorn Seap’s projection, land prices in Phnom Penh will see a slight drop, but investment continues to represent high potential depending on the area.

One potential location for investment at present could be the southern part of Phnom Penh, Dangkor district in particular. However, for long-term investment purposes, the east side of Phnom Penh is highly recommended. Areas such as Areiy Ksatr and Svay Chrum are currently the high potential areas, which will be soon transformed into a new satellite city, especially after the Chroy Changvar-Svay Chrum bridge becomes a reality, according to Prime Minister Samdech Hun Sen.

Condo 

For foreigners who are not eligible for buying land, landholding companies can be one of the remedies. Nevertheless, co-owned space investment such as office spaces, strata offices, or condominiums is the more suitable types for foreigners. According to Mr Sorn Seap, investing in low and mid-end types of condos are the best choices at this moment. There is more demand for these types than others; thus, they are easier to sell. However, some high-end condo projects are exceptional.

Meanwhile, the best locations for condo investment should be areas nearby working offices and business districts, of which Toul Kork has the highest potential this year. The primary purpose of living in a condo is the convenient location, mainly nearby workplace. Since office investment projects in Toul Kork have been proliferating, condo investment there is projected to have the highest potential.

Apartment 

If one is interested in investing in an apartment type of property, Chamkarmon district such as Boeung Keng Kang and the Russian market areas should be the ideal locations. Chamkarmon district is the business district centre, where there are a lot of company workers, both local and foreigners living there; thus, a rental apartment remains a good business to invest in. Moreover, apartment investment projects have lately started to move to Touk Kork as well, since a number of office projects are also moving there. One of the reasons is that the land supply in Boeung Keng Kang is very limited and expensive.

Borey

Investments in the Borey segment are now moving to the southern part of Phnom Penh, Dangkor district along National Road No2, in particular. Prek Pnov district has also been attracting a lot of big Borey projects. For Prek Pnov district, investing in low-end Boreys is recommended, due to the high demand for low-end Boreys driven by industrial development in the area. The price of Boreys in that area range from US$35,000 to US$100,000.

Industrial Estate

Industrial estates are another excellent investment currently. Last year, there was a shortage of supply in the market for warehouses and factories. Around the area along National Road No 4, the rental price for a warehouse is approximately US$2 to US$2.5 per square metre, while within industrial zones such as PPSEZ, the rental price is approximately US$3 to 3.5 per square metre. However, the investor will gain more incentives. Dangkor, Prek Pnov, and Sen Sok districts are the potential areas as the industrial zones are moving there.

Besides Phnom Penh, there are many other significant provinces with huge investment opportunities. Neighbouring provinces such as Kandal province, where the new airport project will be located, is also a good investment location. Kampong Speu is another province to look at as the Phnom Penh-SHV expressway is going to pass through this province and a lot of industrial zones projects are also moving there as well.

Meanwhile, investment opportunities further away from Phnom Penh can be Bavet city in Svay Rieng province, Poipet in Banteay Meanchey province, Kampot province, as well as Kep City. Those are potential areas since they are border areas and future tourism destinations. However, the city that used to be a great potential investment destination—Sihanoukville- is now slowing down mainly due to the crackdown on casinos and online gambling. Meanwhile, the property price in Siem Reap remains stable. (Read More)

In conclusion, one should study carefully the best location for different types of property you want to invest in.

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