Resicom – Holiday Investment – 04-21 – LB

Cambodia – The New Far East Property Investment Destination

Cambodia is still considered a frontier market when it comes to investment, but it has been experiencing strong economic expansion over the past few decades.

Cambodia’s open-door policy on foreign investment, coupled with attractive returns, has managed to turn the country into one of the most highly sought-after destinations for property investments in the region.

Cambodia’s real estate sector has seen tremendous growth in the last several years. Due to a healthy inflow of internal and external investments, there has been a flurry of non-stop construction work in cities such as Phnom Penh and Siem Reap.

At least 43 condominium projects (16,939 units) are expected to be completed this year. This is a huge jump from last year, when only 20 projects (5,000 units) were finished.

Cambodian properties compare favourably with those of their competitors in neighbouring countries, often being cheaper than assets of equivalent grade. The market has considerably more variety than the Laotian market and the occupational market is also more developed. Prices are often lower than in Vietnam and the level of market development suggests that there is often more negotiating room in Cambodia.

Cambodia may not be the usual recommended investment destination. In fact, it only has five company listings on its stock exchange at the moment. However, it is starting to be a very popular property investment destination. This is supported by large multinational corporations that have been lured there by the country’s low taxes and business-friendliness.

The number of overseas property investors in Cambodia has significantly increased over the past few years. While there are investors from all over the world, those from Southeast Asia were among the first to identify the country as an alternative investment destination.

Under Cambodia’s foreign ownership property law, individuals can directly own freehold apartments and condominium units but not land. Should they want to own landed properties or apartments/condominium units on the ground floor, they would need to purchase the property via a nominee or forming a company with a Cambodian citizen.

About 95 per cent of the condominiums in Cambodia are freehold, so overseas property investors do have a lot of options to choose from. One thing that is important to note about buying such property is that the taxes are fairly low. They are also able to avoid some of the taxes, such as the tax on capital gains, by buying off-plan units.

The most popular residential properties are currently in the expatriate communities of Phnom Penh’s Boeung Keng Kang Muoy (BKK1). The suburb is a hot spot for upmarket bars and restaurants, international food and beverage brands and retail stores.

In BKK1, condominium units can cost between US$1,900 and US$3,600 psm, with an average price of US$3,000 psm says Nop.  Meanwhile, in Tonle Bassac, the units can cost US$1,500 to US$5,000 psm, with an average price of US$2,500 psm.

The ruling Cambodian People’s Party is known for its pro-business policies aimed at bringing in foreign direct investment. Also, the country is seen as an attractive investment destination because it is less correlated to the global economy, says Nomad Capitalist founder Andrew Henderson.

He said: ‘Developed and emerging markets tend to be heavily affected by global geopolitical events. But this is not the case for Cambodia as a frontier market. It was barely impacted by the 1997/98 Asian financial crisis, dotcom bust and 2008 global financial crisis. In fact, it has not suffered a recession in 20 years.’

Overseas property investors looking for a profit could find Cambodia full of far eastern promise.

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