The Change in Rental Behaviours Amid Current Market Conditions

• 30 June 2021
• Local News
• 1205 Views

Phnom Penh’s condominiums are patiently waiting for recovery, despite limited sales performance during the three-week complete lockdown due to COVID-19 market conditions. Some developers have implemented significant price promotions to clear their unsold inventory, while others have adopted a “wait-and-see” approach and shifted their attention to the daily-rate market and waiting for the market to improve.

The condominium market in Phnom Penh relied heavily on foreign investors attracted to condominiums with rental programs and guaranteed returns. With limited domestic demand, together with the restrictions, the marketing gimmicks that used to be implemented by developers and real estate agents which successfully stimulated buyer demand, have now become temporarily obsolete.

At the same time, as oversupply continues to dominate the real estate industry, the condominium rental market is in direct competition with actual hotels which are offering heavily discounted prices to attract local Cambodian customers or expatriates staying in Cambodia. Some prefer to stay in an affordable, mid-range hotel rather than renting a condominium unit.

On the other hand, price becomes a major determining factor in the selection of property for the short-stay rental market or a vacation rental market. Luxury-grade hotels in Phnom Penh have a competitive edge over lower-grade daily accommodations, due to the larger range of price discounts available. Almost all the 5-star hotels in Phnom Penh are offering discount schemes – all present excellent staycation options which have proved to be successful as evidenced by a significant number of high-income individuals and families unable to travel abroad who instead decided to take the staycation package, or even the monthly stay package, to experience the complimentary offerings by the hotels.

Under the current market conditions, price along with many other factors such as location, and complimentary offerings all play an impact on the hotel demand. With the focus of the condominium rental market now shifting back to the local Cambodian market, Phnom Penh’s condominiums and hotels may find themselves in a strange situation where they are all competing for this arguably ignored target group of customers in the past.

Going forward, the current attention towards the local Cambodian customer base could prove to be rewarding in the longer term, as a way of market risk diversification and tapping into a new and young, yet local target group. In the long term, targeting locals could potentially lead to faster growth due to the fact that locals understand the market better than foreign individuals and families.

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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.