WB: Cambodia Must Closely Monitor Vulnerabilities from Prolonged Real Estate Boom and Associated Credit Spike

• 17 December 2020
• Local News
• 3021 Views

The World Bank’s latest report has suggested Cambodia continue closely monitor vulnerabilities caused by a prolonged construction and property boom and an increase of credit provided to the construction and real estate sector.

The report entitled Cambodia Economic Update: Restrained Recovery published in November stated that if the pandemic continues and damage caused by recent floods turns out to be substantial, such events will further diminish the ability of businesses and households to repay loans, putting the financial sector under increased stress.

According to the same report, credit to construction, real estate activities, and mortgages have proliferated, recorded at an average of 32.1% per year from 2009 to 2019. The share of credit to three sectors in total domestic credit increases to 31.1% in 2019, up from 18.8% in 2009.

In August 2020, mortgage financing was the largest, accounting for US$3.5 billion. The next one is construction financing (US$2.6 billion) and is followed by real estate financing (US$2.4 billion).

In response, the government has also taken several measures to mitigate the risks in the financial sector caused by the real estate sector. As part of the COVID-19 response, the government has granted an exemption of the ownership transfer tax for property valued at US$70,000 or less. Besides, the capital gains tax (CGT) will be effective in 2022.

• Business and Market
• Economy and Finance