Challenges ahead for the real estate slowdown

• 1 June 2020
• Local News
• 2873 Views

As the number of foreign workers and travellers in Cambodia decreased since the government announced a ban on the Chinese-run online gambling operations last August, there has been a change in demand and a resultant impact on the residential property sector in Cambodia.

Previously, Chinese investments drove the spike in rentals in Sihanoukville, buoyed by cash-rich Chinese who often paid well above the market rates. Prices of land in Sihanoukville have fallen by as much as 30% since the ban was implemented, while rental prices have also slipped to more than half of last year price. So far, some of the newly built developments in Sihanoukville have seen less than 50% of sales.

Many developers have seen sales plummet since last year, due to internal and external factors including slowing economic growth and the slowdown of Chinese economy. Demand from foreigners is expected to disappear in the first half of this year following the coronavirus outbreak as most of the flights between China and Cambodia were cancelled – Chinese buyers typically constitute the largest group of foreign buyers for these developments, and it won’t be easy to rely solely on local buyers. Some buyers may buy such properties as holiday homes, while others buy them for investment. It is expected that the market during the first half of this year will continue to slow, dragged by softer demand from both local and foreign buyers, as well as speculative investors.

Some developers are very cautious about buying land for residential offerings because of concerns about the oversupply of properties in certain locations. They have to adjust their plans to suit the actual economic conditions. For example, condominium launches that were initially set to launch have been postponed, with some developers launching for sales intended only for the local market, and local buyers as local demand is particularly high for newly established residential locations.

The real estate sector slowdown is among the many challenges ahead for the economy of Cambodia in 2020. GDP growth may slow to 6% this year according to the government agency. As a result, developers are expected to only bring a very small number of newly completed housing to the market. After all, the outlook for the residential market for the rest of the year is unclear, given lower rental yields and the lack of growth in expatriate tenant numbers.

By Eric Wong Chon Lap

• Economy and Finance