Continuous Government Infrastructure Development Deters Real Estate Market Slowdown

• 26 January 2021
• Local News
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Due to the COVID-19 pandemic, overall real estate transactions in 2020 decreased by 15%- 20%, yet the average sales price remains robust, according to the Cambodia Valuers and Estate Agents Association (CVEA).

Given those figures, Cambodia has tended to do better compared to neighbouring countries. There are many factors contributing to this robust market; however, most analysts have claimed that the most important is the government’s continuous effort in infrastructure nationwide development.

CVEA Vice-President Man Chandy explained that for most of the cases, land price increases due to nearby major development projects, especially government infrastructure development. Thus, if the government continues to build more infrastructure in various locations, land prices will not fall.

“If the government continues investing more and more in infrastructure, it will help boost the sale and purchase transactions in those areas. Given that, prices won’t drop as was expected, even though the country has been facing the COVID-19 crisis,” said Mr Chandy.

“For example, in Sihanoukville, the government has built 34 roads. In Siem Reap, there is a 38-road project. Obviously, land prices in Siem Reap have not dropped. In Kampong Speu, the government also plans to build 14 AC roads connecting Chbar Morn city to NR44, NR41 and NR51. The land price there last year was only US$2.5 per square metre, now its double,” he added.

Besides what Mr Chandy mentioned, the government in 2020 broke ground on many other infrastructure developments, such as the NR2 and 22 renovation project, NR10 connecting Battambang and Koh Kong, a bridge connecting Koh Pich to Koh Norea, among others. (Read more)

Major Infrastructure Projects Broken Ground in 2020

In addition to what Mr Chandy explained, analysing the situation from a macroeconomic point of view, government spending on infrastructure is a smart way to boost GDP through the so-called multiplier effect. Simply put, when there is a development project, there will be a flow of money and more jobs will be created, which is a factor that stimulates the economy. As a result, when the economy is robust, the real estate sector will follow.

In fact, the International Monetary Fund (IMF) once used to recommend that Cambodia should increase public infrastructure spending to about 0.5% of gross domestic product to maintain robust economic growth.  (Read more and more)

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