Construction & Real Estate May Not Return to Pre-COVID Level Anytime Soon, says WB

• 10 December 2021
• Local News
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The construction and real estate sector in Cambodia remain under pressure stemming from the COVID pandemic and may not recover to the pre-pandemic level anytime soon, despite the 2022 GDP growth forecast of 4.5%, according to a World Bank report issued on 9 December.

The report said that major commercial and residential development projects continued to be impacted by the pandemic. Besides, excess supply may have resulted in reduced foreign investor appetite for investing in property development projects.

The real estate industry indicated that completions of development projects continue to outpace take-up. All segments of the property market have been hit hard by the pandemic. In the third quarter of 2021, the condominium market experienced a subdued quarter, with two-thirds of the anticipated completions being delayed to next year.

The decline is caused by factors such as construction supply chain disruption, workforce availability crunches, and in some cases, cash flow stresses brought about by slower than expected sales.

However, a small segment of the housing market—low and affordable residential property—remains resilient.

Similarly for the construction sector, during the first nine months of 2021, approved construction permit value and area declined by 24.8% and 17.1% year-on-year, respectively.

Despite the fact that those developments have been financed in large part by FDI, its collapse, if it occurs, will have a far-reaching impact on the domestically financed property development industry, and eventually on the financial sector.

Monetary and fiscal measures introduced to prop up property development activity may be able to help the industry stay afloat in only the short term.

The World Bank stated that unless the relaxation measures can help restore external demand for the country’s capital-intensive property development projects, the boom for these two sectors may not return anytime soon, given Cambodia’s relatively small domestic market.

 

• Analysis
• Economy and Finance