How Chinese buyers disappeared from the Cambodian real estate market and the impact on local sellers

• 23 July 2020
• Local News
• 3541 Views

By Eric Wong Chon Lap

The local Cambodian market has lost its most important source of inbound investment, as the coronavirus pandemic clouds the economic outlook and keeps Chinese investors from travelling to Cambodia.

This is in stark contrast to a few years ago when Chinese investors were snapping up condominium spaces. A lot of these buyers are now taking a step back because of the global economic outlook. In addition, capital controls imposed on money flowing out of China are also hurting real estate not only in Cambodia but around the world.

The COVID-19 virus has also continued to affect hotels and condominiums that service tourists and property buyers. China has placed restrictions on movement, and this has posed a threat to real estate developers in Cambodia, as Chinese clients are unable, or unwilling to fly to Cambodia.

The Cambodian authorities have also stopped issuing tourist and entry visas which deterred people from travelling to Cambodia for site visits. With many condominium developments approaching completion, and Chinese clients unable or unwilling to transfer, they would rather have their deposit forfeited, or request a refund and withhold their investment which can be caused a big financial hit to the developer.

As a result, property developers should step up their marketing promotions to attract local homebuyers; this may present a golden opportunity for consumers who are planning to buy a condominium unit at an affordable price, or below market value.

On the other hand, some of the real estate sellers are desperate for money because, unlike sellers in most other countries, they borrow beyond their means to finance the property in the first place. Motivated sellers are now beginning to reduce prices to make their properties more attractive, particularly in Sihanoukville. Some people made irrational or emotional purchases before COVID-19, which has cost them significantly more than their property was worth. As money becomes tight, they may need to raise cash quickly to cover and finally cut their losses and offload the property at a lower price.

It is important for property buyers to take into account that purchase of residential property is a long-term financial liability; therefore they must take into account their debt serviceability in the long run, together with additional expenses that may incur which affect their ability to pay the instalments before they made any purchase decision. Nonetheless, the post-COVID-19 market is expected to gradually come under control, and this will improve the overall property market sentiment if the country does not suffer the second wave of COVID-19 infections.

Eric Wong has extensive experiences in the field of property consulting and development sectors, primarily within the emerging markets of Southeast Asia. His previous role involved with assisting in the development of project budgets to ensure the operations are within cost restraints, developing and executing projects for the assigned market areas etc. From the property consulting prospective, he has lead market research assignments inclusive of providing descriptive, exploratory market research and analysis reports within the office, residential, hotel and retail segments in both quantitative and qualitative methods to determine suitable development types, scale and product mix, and address property-related matters from project positioning to absorption rates, phasing and pricing and marketing strategies etc.

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