Impacts of China’s Evergrande Crisis on Cambodia’s Property Market

• 2 October 2021
• Local News
• 3420 Views

Since one of China’s largest property developers Evergrande Group is facing a financial crisis, many analysts have been calculating the impacts not only within China itself but also other foreign countries dependent on Chinese investment.

Cambodia is among those whose property market is largely reliant on Chinese investment. Will the Evergrande incident burst the property bubble in Cambodia?

According to an article The Diplomat by David Hutt published on 30 September, the risks of the property bubble burst in Cambodia has been warned of by experts even before the COVID-19 pandemic or even the Evergrande incident.

Managing Director of CBRE Cambodia James Hodge is quoted in the article saying the possible collapse of Evergrande will not have a “direct impact” on Cambodia, as the firm in fact has no investment in Cambodia.

However, this crisis might affect the expatriate Chinese population, in Cambodia and put pressure on Chinese developers in a way, he added.

Due to the COVID-19 pandemic, many Chinese investors have already left Cambodia, which has made the property developers shift their targets to local buyers. Some would provide up to a 30% discount to the property with an event higher agent commission rate at 15% to increase their sale.

James believes that Evergrande’s possible collapse and its impact on the Chinese economy will likely make the discounting trend continue. As Cambodia is not their main market, Chinese investors would exit the Cambodian market to focus on their core business in China, resulting in fewer buyers for the Cambodian market.

Another concern is the effect on Cambodia’s banking sector, especially if the Chinese pullout sends property values further downwards. The World Bank previously warned Cambodia that it is imperative to continue to closely monitor vulnerabilities arising from a prolonged property boom and the increase of credit provided to the construction sector during the pre-pandemic period.

Nevertheless, the impact on Cambodia’s wider economy remains to be seen.

Finally, Evergrande’s problems could cause short-term problems in Cambodia, but it would help make a healthier, more diversified real-estate market in Cambodia in the medium term.

As an effect of Chinese investment pullout, developers will further drop property prices, which will make those properties more affordable for locals, bringing light to affordable housing and put an end to over-speculation in the sector.

• Analysis
• Business and Market
• Investment and Funding