Condominium Purchasers in Phnom Penh to Have More Negotiating Power

• 10 June 2019
• Local News
• 2938 Views

In the coming years, there will be more challenges, change, and opportunities for Phnom Penh’s condominium market – the challenges will be matching the new products with real demand, as the number of condominium units from all sectors, from affordable, mid-range to luxury sectors, will grow significantly.

The rapid and significant rise in land prices in Phnom Penh has resulted in developers having to ask much higher prices for new residential developments. Rapidly increasing land prices in Phnom Penh also means that development costs and asking prices for new condominium developments have continued to increase. However, purchasing power has not risen significantly, and flat rentals mean that investment yields have fallen for those buy-to-rent investors.

Over the past few years, foreign demand, principally from mainland Chinese buyers, has off-set the local demand, but it is uncertain if mainland Chinese buying will continue at the same pace and if their expectations of anticipated returns will be realised after all these residential developments are completed. Nonetheless, both local and Chinese-backed supply and demand are likely to be the biggest influencing factors on Phnom Penh’s real estate sector in the mid-term. In the near future, the residential developments targeting middle to low income buyers with low interest fees will be the big growth market here in Phnom Penh.

In general, not every residential development being completed has sold out and there has been a build-up of completed, but unsold condominium units, particularly those located on the outskirts of Phnom Penh.

At the same time, there are also residential developments in the prime areas of Phnom Penh that have unsold units more than six months or one year after completion. The challenge for developers will be to clear the unsold inventory and under construction inventory, which will present opportunities for value driven end-user purchasers. Some developers have been offering both soft discounts in terms of furniture provision, as well as hard price discounts to clear out their inventory.

We can anticipate that the bargaining power will shift to the purchaser, with more purchasers starting to look at resale units in completed developments – the key change being a shift from investment purpose to real end-user demand. The challenges for developers will be to clear completed and uncompleted inventory and find opportunities for new developments that meet purchasers’ budgets, location and space requirements.

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