How Developers are Offloading their Stuck Residential Inventory in this Challenging Time

• 30 June 2021
• Local News
• 1836 Views

COVID-19 has impacted the residential market broadly with no significant improvements during the first quarter of 2021. There were almost no new condominium units launched for the first three months of this year, and most of the major developers are rushing to revamp their strategies, focused on making quick revenue in order to manage and settle their cash flow in this challenging time. For the existing residential inventory, discounts and sales promotions are offered by developers which were ready to be transferred, with some projects extending up to 20% to 35% discounts.

At the same time, there is a risk for foreign buyers to default on the transfer of ownership. As international travel is still limited, the challenge remains for developers to complete their unit transfers to foreign buyers, except those developers with sales offices abroad in which the entire transaction process can be carried out in their offices there. For the other developments, some of these buyers are unable to make travel arrangements, even if they wanted to transfer the units. As a result, there is a possibility these buyers might not proceed with transferring their units, and this could lead to the previously “sold” units coming back onto the market.

In fact, the key milestone for further recovery in the market is when international travel restrictions are lifted. Not only will this help residential market sales, but the economy will also depend on it as Cambodia is still unquestionably driven by real estate-related industries.

Amid the challenges and changes, there is still life in the real estate market. There are a variety of products with good pricing available to buyers in Phnom Penh and key resort destinations like Sihanoukville, Kampot, and Kep, etc. With travel restrictions including outbound flights, there is a new second home market that can be developed in the above key resort destinations. Developers have opportunities to capture the middle to high-end segment if they understand the gap in these markets and the sentiments of purchasers.

After all, there is still demand in the market once the lockdown measures had been lifted. The recent news on vaccines against COVID-19 has been a confidence boost to the real estate market. Once the vaccines can be distributed globally, market activities and sentiment are expected to recover. This residential market will gradually recover but it may not return to its pre-COVID-19 level. For Cambodia, the timeline to fully recover will depend on the economic conditions, the flow of foreign investments into Cambodia, and whether demand for residential properties can come back to the levels seen before the COVID-19 pandemic.

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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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