Hard Lessons for Property Developers and Buyers in Cambodia

• 25 August 2021
• Local News
• 1751 Views

Like many hoping for easy cash in Cambodia’s property market, many individual buyers borrow money from the bank they didn’t need, and their sole purpose is only planned to flip. The only question is how big the profit would be? or if they can make a profit out of the current market conditions?

The local real estate market has stalled, but the good news is price doesn’t expect to fall much deeper. Some developers are halting projects or delaying new ones. Since the second wave of the pandemic began in February this year, investors’ confidence has once again weakened further, as property sales ped and incomes were hit hard and this has forced potential buyers to tighten their purse strings due to loss of income, which would also affect housing demand and the sales market.

The residential sector had already been on a downward trend before this COVID-19 outbreak, due to an oversupply of units, high household debt, and unrealistic pricing especially in the core areas of Phnom Penh. In response to this, the price of new opening residential units from developers has dropped slightly in line with the lack of customer demand. Meanwhile, foreign property buyers, especially Chinese investors, have been affected by the lockdown measures which have stopped them from continuing business and investment activities abroad, and as a result of this property, developers had to reduce the price of new developments in order to encourage more sales.

Developers’ strategy to offer a special promotion to persuade customers and clear unit stocks, but this would cut their profits. There is also a large volume of unsold housing developments that remain for the high-end segments. For buyers who have a secure job and stable financial status, they’re still mindful of their purchase decisions. At the same time, banks are imposing stricter rules on property buyers and reportedly denying mortgages. Many property buyers are rejected for mortgages because banks have become more cautious than before the pandemic.

With the real estate market remain uncertain in the first half of the Year 2021 and probably continuing to be so for the rest of the year, it has put more pressure on both developers and buyers. This economic slowdown and lower confidence among buyers will lead to a further drop in prices for the property market. Given the current market conditions, developers will have to contain a lower profit margin. Property buyers may also have to bear the risk of selling their existing properties at a price with fewer returns, or lower than their purchasing cost in the worst scenario.

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Eric Wong has extensive experience in the field of property consulting and development sectors, primarily within the emerging markets of Southeast Asia. From the property consulting perspective, 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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