Property Beyond Dreams

Real Estate Investment in Cambodia

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3.3 minutes read

Real estate investing entails the buying, ownership, operation, leasing and/or selling of real estate for profit. Improvement of real estate property is a real estate investment strategy which is called real estate development. Real estate has limited liquidity relative to other investments. It depends on cash flow as well. It might become a risky investment if these factors are ignored.

In English common law, real property (a.k.a real estaterealty, or immovable property) is defined as land which is owned by someone and all structures (also called improvements or fixtures) integrated with or affixed to the land, including crops, buildings, machinery, wells, dams, ponds, mines, canals, and roads, among other things.

https://en.wikipedia.org/wiki/Real_property

With a healthy inflow of internal and external investment, the country’s construction sector has been non-stop until 2019 but got slower in 2020. In a recent media report, a famous company was quoted as saying that more than 1,000 new residential and business projects are to be completed this year. That’s more than last year when only about 500 new housing units were completed. Attractive returns, coupled with low-interest rates and low cost of capital, have made this country one of the most sought-after destinations for foreign investors in recent years. [References: 6, 9]

Faced with such a sharp rise in development, many expats in Cambodia have decided that renting could be more cautious in the coming years, as property prices are currently at record highs and are likely to fall as the supply of new units continues to grow. It might be wise to wait for construction to finish and prices to adjust before considering buying a property in a few years, he said. If many developments are built as planned, there is also the risk of investing in projects that are not completed. [References: 4]

Current Prices

Despite these risks, early foreign investors have benefited significantly from the boom. Compared to many ASEAN countries, properties in the country can be purchased for less than $1,000 per square meter. Properties in Phnom Penh urban areas can range from $500 per square meter in lesser-known areas of the capital to more than $12,000. The boom in the commercial, industrial, and tourist sectors has led to increased demand for residential and commercial, and industrial space. Real estate can either be converted into living space or into office or residential units. [References: 5, 8]

According to a recent report by a real estate consultant, there are 22,828 luxury apartments in the Cambodian capital. That number, which includes condominiums that sell for an average of $3,500 per square meter, will rise to about 30,000 units by 2020, he added. Chinese buyers in Phnom Penh have fueled speculation that they are pumping up a market that is already unaffordable for most Cambodians. [References: 2]

Experts agree that investing in residential property is very promising and a safe bet to say the least. Cambodia’s relations with China will continue to attract more foreign investors, particularly from Asia and the Middle East, as well as the United States and Europe. Due to the high population density and disposable income, tourism will also stimulate real estate demand. [References: 8]

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Before investing

Before you start investing in ROI in Cambodia, you should know the general aspects that you need to understand to make an informed decision. A rental return is the percentage of a property’s net operating income that is generated from rental income. The property will increase in value if it is improved by the rent and development and location. [References: 3, 5]

Residential yields can be as high as 8-9%, while the indicative gross commercial R yield (GRCR) can be as high as 11%. It is important to note that the land tax in Cambodia will affect net returns. [References: 0]

Foreign investment

The country, still near the bottom of many global development indices, is home to the largest number of foreign investors in Cambodia’s real estate sector. Laws allowing foreigners to buy high-rise real estate have paved the way for investors like Yang, and the city has approved the construction of the first phase of a $1.5 billion residential project in Phnom Penh. [References: 7]

Cambodia China Japan relations

Cambodia’s relations with China will continue to attract more foreign investment in the country’s real estate sector in 2018, paving the way for a strong 2019. Thanks to its popularity as a tourist destination, tourism will also boost Cambodia’s real estate demand, and, according to a recent International Monetary Fund report, it continues to be a growing trend. [References: 8]

Cambodia’s relations with China and Japan will continue to attract investors in real estate, clothing exports, and tourism. Cambodia remains one of the top 10 countries in Southeast Asia in terms of GDP growth rate and is the world’s second-largest exporter of clothing after China, driven by real estate and clothing export tourism, according to the World Economic Forum (WEF). The first phase of a $1.5 billion infrastructure project in Phnom Penh will be completed by the end of this year, boosting demand for real estate through good communication and paving the way for a strong 2020. [References: 3]

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Why should I invest in real estate in Cambodia?

The prices are of the low and middle priced property in Cambodia are at the lowest now in 2021 due to Covid-19. Some property prices have gone down to 20-40%.

Cambodia has political stability over 33 years, GDP growth more than 7% continuously over 5 years with acceleration until 2020. In 2020 it was negative and in 2021 it is expected to be 4%. [References: 10] One Belt One Road (OBOR) projects attract more overseas investments, not only Asian but also, Western investors since investment and profit are universal. Cambodia is ranked as the world’s third Dollar asset country with financial freedom no restriction on financial transfers.

Permanent property ownership (directly for condos and indirectly by setting up a company for other property and land), low property tax, low start-up capital with high return.

Cambodia has a young population with high labor force. It attracts investors leading to a peak on industrial property demand in 2019-2021. There is no capital gain tax, that makes the profit of the property sales value to remain only to the seller, and free repatriation of profit.

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References:

https://www.mysgprop.com/cambodia-property-taxes-foreigners-guide/ 0

https://cne.wtf/2019/10/23/8-reasons-to-invest-in-cambodia-property/ 1

https://www.reuters.com/article/us-china-cambodia-property/in-cambodias-capital-chinese-buyers-pump-luxury-property-bubble-idUSKCN1IP0MU 2

https://www.propertyarea.asia/real-estate-market-news-in-cambodia/ 3

https://internationalliving.com/countries/cambodia/real-estate-cambodia/ 4

https://www.b2b-cambodia.com/articles/cambodia-real-estate-market-in-2019/ 5

https://english.cambodiadaily.com/business/property-investing-the-appeal-of-cambodia-147294/ 6

https://www.voanews.com/east-asia-pacific/foreign-investors-surge-cambodian-condo-market 7

http://www.kfa.com.kh/Real%20Estate%20Overview%20in%20Cambodia.php 8

https://www.theedgemarkets.com/article/property-investing-appeal-cambodia 9

https://www.worldbank.org/en/news/press-release/2020/12/15/cambodian-economy-hit-hard-by-pandemic-but-projected-to-recover-in-202110

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