Invest In Cambodia Property

The Ultimate Guide On Property Investment Opportunities For Singaporeans In Cambodia / Phnom Penh- Get All The Property Market Facts

Situated on Indochinese mainland of South East Asia Cambodia is truly a beautiful and serene country with low lying plain and mountainous regions. With steady economic growth, Cambodia is fast becoming a destination hotspot for investors looking to spend their finances on various sectors of the economy.

In Singapore, overseas property investment rose by 40% a new record US$28.4 billion making it one biggest source of capital globally, this surge signals confidence of Singaporean investors in the vibrant real estate sector. In this post, we are going to discuss Cambodia property market and its various aspects giving potential investors a clear roadmap on what to expect.

Cambodia Gross Domestic Product

Cambodian economy continues to gradually grow at a steady rate with a population of 16.01 million. At present, it’s an open market system boosting its overall growth rate over the last decade. In 2017 it had a GDP of $22.16 billion, though it’s significantly lower compared to its neighboring countries.

Cambodia has 2 main industries that contribute a huge chunk of its GDP: textiles and tourism respectively. However, agricultural activities still remain one of the major sources of income for the majority of Cambodians living in rural areas.

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Cambodia Economic growth

According to the world bank, Cambodian GDP growth is projected to remain robust and grow slightly to 6.9% an increase from the previous year that stood at 6.8%. The surging economic growth is boosted by an increase in apparel and textile exports, agriculture and tourism.

The high growth trajectory is underpinned by increased government spending and favorable policy framework that has streamlined the ease of doing business attracting investors looking to finance various projects rapidly boosting the overall strength of the economy.

In order to maintain a strong economic growth, the government will heavily back skill training and education providing a skilled workforce and also address problems facing SME’S for a prosperous future of all Cambodians.

There still remains risks which threaten economic growth, especially in the Cambodia property market as a result of a prolonged construction boom. Increase in real wages is still a major issue and erosion of exports competitiveness hinders positive growth and the government needs to respond swiftly to address these shortcomings.

KEY CAMBODIAN INDUSTRIAL SECTOR

Tourism

Tourism is an important driver in Cambodian economy contributing $3.6 billion 12.2% of GDP. In 2017 tourist arrivals increased by 11.8% in comparison with 5% in 2016. This growth was partly driven by increased regional flights especially to China a crucial market for tourism which accounted for 1.2 million Chinese tourists who visited the country in 2017

According to the Ministry of Tourism, it expects to welcome approximately 6 million international tourists in 2018. The government has predicted it will hit 10 million tourists by 2025, Tourism is crucial as a way of wooing investors as they will get to see the country first hand and carry out a feasibility study on investment in Cambodia to map out gaps that could yield huge returns.

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Reasons to Invest in Cambodia

Robust GDP growth

Cambodia has registered an average of 7.63% from 1994-2017, progressive economic growth has led to the world bank revising the country from a low-income category to a middle-income category.

Political stability

The kingdom has enjoyed political stability in the past under steady leadership of current prime minister. Clear government power structure headed by experienced ministers ensure there is a positive framework that increases efficiency in ease of doing business, reducing bureaucracy and eliminating corruption.

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Favorable investment climate

The government has implemented policies that favor foreign investors such as allowing 100% of foreign ownership except for land, eliminating Capital tax gain and no ABSD, these favorable incentives have boosted investor confidence.

Inexpensive workforce

Cambodia has one of the lowest earning rates in Asia, with a literacy rate of 75% you can get skilled and trained workforce willing to learn. Low salary rate is important, especially when starting up a business by foreigners.

Trade integration

Cambodia is a member ASEAN group offering access to regional trade benefits such as preferential export to developed economies and duty-free imports. It’s also part of China One Belt Road Initiative opening up the country to new trading routes and economic partners.

Real Estate in Cambodia

Cambodia fast economic growth coupled with a huge injection of foreign capital has caused a surge in the real estate sector not only in Phnom Penh but also other parts of the country. The Ministry of Land Management and Urban Planning and Construction reported that total investment in the real estate was US$365 million comprising 586 projects at the beginning of 2018.

The 1st quarter of 2018 saw land prices in prime location grow by 1.2% QOQ and 4.2% YOY. The industry is growing at a rapid pace as a result of Chinese Foreign Investment who have invested heavily in Phnom Penh property market.

The desire for affordable housing by the locals has spurred developers to build new condominium projects that are reasonably priced in line with the government’s policies.  Its predicted that Cambodia property market will continue to soar due to increased interest from several neighboring countries especially Singapore, Korea, and Japan.

Cambodia Market overview

For commercial property, the office sector in 2018 is strong than ever before as a result of the higher occupancy rate of 82.7% despite increased supply and rents holding steady across the quarter. strata-level office projects are slated to be completed at the end of this year as a result of increased foreign firms operating in the country.

Rental and occupancy for Grade B and C remained stable throughout the year. However, experts have warned that future supply will continue to shrink as the property market continues to mature.

For condominium projects, it shot up throughout the course of 2017 with 8,600 units being constructed representing a 107% increase from the previous year. Supply is expected to increase in 2018 with 13000 unit slated for completion by the end of the year. Strong occupancy rates for condos has been attributed to increased interest in Cambodia by foreign expatriates. 2018 is set to be the year of the retail mall with supply expected to double by the end of Q4.

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Supply trend

Over the entirety of the 1st quarter of 2018 over 1200 condominium units were developed marking a total supply increase of 14% to almost 10000 units in Phnom Penh Cambodia. As at Q1 of 2018 the supply of luxurious condominiums accounted for almost 19.2% of the total combined supply.

In 2018 its projected the supply of mid-range and high condominiums will increase in supply as developers look to cash in on increased interest from foreigners and desire for home ownership by Cambodian citizens themselves.

During the same period, 2 condominium projects launched off-plan sales providing 2,244 units catering for the affordable segment targeting mid-class range buyers. The condominium projects will be located in Sen Sok and Mean Chey districts.

Demand trend

As at 2017 13,000 units were estimated to have been sold, a 27% increase from its previous year. In the same year, 14,000 new units were developed all across the capital an 11% increase from 2016 which witnessed the spring up 12,500 housing units.

Moving away from the capital the uptake is even higher as its estimated that almost 13,000 new units were sold in 2017. A housing market reports found out that only 10000 units were available as compared to 2016 which had an availability of 18,000 units. The increase in uptake rate is attributed to co-operation by the government and private sector to provide of safe and stable housing for everyone and an increased desire by new generations to buy homes and move from lower class and shit to middle and high-class bracket.

Pricing Trend

At the end of Q1 of 2018, there was a 2% downward adjustment on prices of both high-end and mid-range condominiums in comparison to the previous quarter. The price adjustment is a ploy by property investors to increase more off-plan sales.

For units in the affordable category, there was an increase of 7% QOQ. For land prices in 2018 its predicted there will be a decrease of 2 to 5% as a result of both economic and political factors being an election year investors are planning to take a back seat and see how the pre-election unfolds. Highest Land price for commercial use was $6000 per square meter while for the residential land price it was $4000 per square meter.

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Rent trends

In 2018 Rent in the capital for both mid-range and high-end condos in prime locations fell by 3.8% QOQ. By the end of the quarter, the average rent price per square meter was S$12.50 and $15 per month.

These downward adjustments for high-end condos prime locations are down to environmental factors and noise pollution as a result of ongoing high rise projects within the capital causing a slight decrease in rent demands. To counter that, landlords have offered incentives on rent discounts to attract more tenants. 

Property taxes in Cambodia

When buying property as a foreigner you are required by the law to pay a stamp duty of 4% when transferring ownership. The levy is computed through the actual transaction price and government valuation of the property. There is also 0.1% property tax payable on an annual basis

For commercial properties, you will be mandated to pay a withholding tax of 10% on the rent. The responsibility of the withholding tax is shouldered by the landlord and the lessee is the withholding agent and pays obligations on their tax return

For residential properties such as condos, you will be required to pay 10% value-added tax with the exception where the property stands on, the same applies for the lessee if they are registered taxpayer and a 10% withholding tax is deductible.

Foreigners who rent out their property will be required to pay 14% rental tax of their gross rate annually. In the event that you do sell your property a 20% capital gains tax is deductible from the total sale price.   

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Buying property by foreigners

Purchasing property in Cambodia has been simplified into 6 simple steps

  • Apply for a unit under development, once you’ve been shortlisted pay a reservation fee to secure your unit
  • A sales purchase agreement will be sent to you in 14-21 days
  • Vet the agreement with your lawyer to understand various clauses in the agreement
  • Make a down payment for the project, it usually ranges between 10-50% depending on the project development stage
  • Upon completion pay the remaining balance of the purchase price
  • During the application for hard title ownership, you are required to pay 4% transfer tax deductible from the purchase price.

Securing loans for foreigners

Cambodian banks offer loans to up to 60% of the property market value with interest rates set at 10-12% per annum. There are special rates offered by private banks to individuals and corporates who are servicing existing long-term loans at the bank. The special rates as of 2018 range from 6-9%

Top Cambodian property’s

Here are some of the hottest Cambodia property for sale

The Peak Shoppes

Located at the heart of Phnom Penh’s Commercial district, it’s one of the tallest project developments with 55 storeys. It’s an integrated mix development comprising of residential executive condominiums, shopping malls and hotels, and office space.

The property has 1014 apartment units both in tower 1 and 2 with 254 shop units. The property has breathtaking views of the Capital’s skyline, its close proximity to amenities and transportation routes have made peak Cambodia one of the most sought properties.

The Peak Residences

Located in the capital Phnom Penh, the highrise condominium project is developed by Oxley gem Cambodia. The property has 55 storeys with 507 units comprising of 2 bedroom apartments. The peak has twin residential towers and a commercial skyscraper, it’s truly an architectural masterpiece

It has world-class facilities, the property is close to major MRT stations and expressways opening up access to and from the property to various regions.

The Gateway

Situated along Russian Boulevard, the project will comprise of 2 storeys of retail mall space, 26 storeys of luxury residential apartments and 24 storey office space tower. The project will be a stone throw away from the CBD and it’s closely situated to major expressways and MRT stations.

Research carried out shows high yield potential and capital appreciation every five years making it a viable Cambodia property investment.

FINAL VERDICT

Cambodia property outlook is looking strong and favorable due to increased foreign direct investment and the growing need for affordable and safe housing by the locals. With increasing Cambodia property prices its real estate sector is predicted to remain strong and resilient for years to come due to a stable economic growth rate of the country, this is one of the best times to join in the party!   

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