Q1 2021 Market Overview: How has the Recent Urgent Surge in Community Outbreak Affected the Market?

• 6 April 2021
• Local News
• 4133 Views

The real estate market in Q1 of 2021 remains under pressure from the COVID-19 pandemic. Although most experts have forecasted that the market will experience a fast-paced recovery in 2021, the recent surge in the community outbreak has led the market to a further unpredictability, according to CRBE Cambodia’s recent report.

The report entitled Q1 2021 MarketView stated that oversupply is still the top concern for the market at this moment, followed by the reduction of the liquidity and construction delays. However, threats caused by international sanctions and domestic regulatory changes have become less of a worry among the public in 2021 compared to 2020.

The most significant change in Q1 is the price reduction in landed-property, or boreys, by 15%, after staying robust against the effects of COVID-19 for more than a year. The retail and office sectors again are still the two most affected, yet rental price adjustments have tended to become stable after one year of downward adjustment. Meanwhile, the condo market is also still in the contraction stage with many delays in handover date, as foreign investment has yet to improve.

The same report also summarised the details of each market sector as follows:

Condo

Construction delays, as well as the delays in handover date, are the two main concerns in the condominium market at the moment, followed by the oversupply issue. Seven projects out of 19 which were originally expected to complete in 2020, have been delayed to 2021.

During the first quarter of 2021, there were four completions adding 793 units to the pipeline, or equal to 7% of the forecasted supply 2021. Meanwhile, the quoting sale price q-o-q increased by 4.8% and 3.5% for high-end and affordable, at an average of US$3,000 and US$1,500 per square metre respectively.

The rent surprisingly slightly increased for all three sectors, respectively by 1.7%, 1.3%, and 5.4% for high-end, mid-range, and affordable type.

Landed Property (Borey)

The most significant observation for this sector is the reduction in the average selling price by 15%, indicating the borey sector is no longer immune to the COVID-19 after staying robust for over a year of the pandemic.

The price reduction is not solely caused by the COVID-19 pandemic, but also due to the surge in market competitiveness and the trend of moving project locations further out of the city. As more and more developers enter the market, promotion and price reductions tend to occur. Similarly, developers are also getting cheaper land price further out of the city, which also make the selling price reduce.

Between Q4 of 2020 to Q1 of 2021 (6 months), there have been 11 completed projects, adding approximately 4,500 units to the market, or about 15% of the projected 2021 supply. There were also 21 new launches, which will add 15,500 units to the pipeline in the future.

Office

In the Cambodia context, although the trend of working from home has been increasing, the office remains important, making the demand trend stable. The number of deals was increasing as many firms have renewed their contracts for 2021 rental. The occupancy rate in total was at 74.7%, down by 2.3% q-o-q.

There were two completions in Q1, adding over 18,000 unit supply to the market or equal to 9% of the 2021 forecast supply; and 65% of which are centrally-owned offices. Rental rates saw a slight increase by an average of 3% in all grades both in the CBD and NCBD. The stability in rent price adjustment is due to the fact that the rate has already been adjusted quite a lot over the past year.

Meanwhile, the quoting sales price for strata-title offices was at an average of US$3,129 with a 7.9% growth rate of return (US$26.8 rental price per square metre).

Retail

This sector is still the hardest hit among all, especially given the recent surge in the community outbreak. According to the Phnom Penh Mobility Tracker, as of late March, the sector is almost 50% below the pre-20 February community incident. Meanwhile, the occupancy rate in Q1 was 74.9%, down by 8.6% q-o-q.

In terms of supply, there were four completions including Green Avenue in Sen Sok, TK Central in Toul Kork, View Park Mall in Daun Penh, and Boeung Snor Food Village in Chbar Ampov. These four malls added over 28,000 sqm to supply, 19% of the forecast supply in 2021.

The rental rent for prime high street locations dropped by 10% while the quotes for community malls, on the other hand, increased by 4.2%, while there was no adjustment for prime shopping malls and retail podiums.