Phnom Penh Condominium Market, CBRE Cambodia MarketView in July 2014

July 2014 300x24 Phnom Penh Condominium Market, CBRE Cambodia MarketView in July 2014

PHNOM PENH CONDOMINIUM MARKET CONTINUES TO EXPAND FOLLOWING SUCCESSFUL OFF-PLAN SALES

July 2014 1 105x300 Phnom Penh Condominium Market, CBRE Cambodia MarketView in July 2014INTRODUCTION
The condominium market in Phnom Penh is continuing to expand, driven by successful off-plan sales of high profile projects, such as Nuri D&C’s De Castle Royal and Oxley Holdings’ ‘The Bridge’.
CBRE has seen a significant increase in investment from Singaporean, Japanese, Hong Kong and Chinese residents. Although the comparatively high yield guaranteed by a number of leading developers is appealing to oversees purchasers, the main driver remains anticipated capital growth.
Currently, there are 24 Condominium projects in Phnom Penh, including both finished projects and developments currently under construction.
The growing confidence in Phnom Penh’s condominium market continues to drive further development activity with a significant pipeline of planned projects due to come online through until 2018.
SUPPLY
Phnom Penh is set to experience a significant increase in supply, with De Castle Royal imminently set to deliver 414 condominium units and with Galaxy Residences set to deliver further 44 condominium units in Q4, 2014.
Overall supply in Phnom Penh is due to increase by 191% by 2018, driven by large-scale new projects such as D.I. Riviera and Olympia City, both currently under development by OCIC.
SALES
Sales of condominiums in Phnom Penh have traditionally been heavily marred by publicised failures of developments that have been sold off-plan and then subsequently ceased construction. Due to the successful completion of key new projects, such as De Castle Royal, this trend has clearly come to an end as confidence grows amongst domestic and international purchasers.
Impressive off-plan sales rates have been reported by a number of leading developments, with The Bridge’, located in Tonle Bassac, having successfully achieved a sales rate of 85% for the condominium units, within 4 months of launching their sales campaign at an exhibition in Singapore.
Achieved prices for high-quality condominium units range from $1,500 – $3,000 USD per sq.m in central areas of Phnom Penh. The Bridge, which is due to deliver a 762 condominium units, in addition to 963 ‘SoHo’ units and further retail space, accounts for the upper figure.

July 2014 2 300x174 Phnom Penh Condominium Market, CBRE Cambodia MarketView in July 2014

DEMAND
Demand for condominiums is anticipated to increase and be met by supply in 2014 through to 2015. The introduction of high quality products in downtown locations will offer prospective investors an opportunity to acquire products that focus on the needs of a heavily expatriate driven area of the Phnom Penh residential market, as foreign nationals continue to require exclusive and up market accommodation in popular locations. Demand is also increasing from an ever more affluent domestic population, which is due to account for a notable proportion of purchasers over the coming years. Domestic demand is a key element of a successful condominium project, due to foreign ownership of an individual building being restricted by law at 70%.
OVERVIEW
Q2 2014 witnessed the sales launch of Oxley Holdings’ ‘The Bridge’ mixed-use development, which comprises a total of 762 residential units. The high off-plan sales rate, which currently stands at 85% , with only one-bedroom units remaining, highlights the strength and appeal of the market to international purchasers, with the majority originating from Singapore. It is important to note, however, that there has been significant domestic interesting in the project.
The successful launch of De Castle Royal, which will set a new benchmark for quality in the market, will further add strength to the ever-growing sector. Comprising a total of 414 units, the project has been key in rebuilding confidence off-plan sales market.
CBRE note that a number of individuals, in addition to established developers, are making considerations towards the construction of further condominium developments, reinforcing their focus on the market, and furthermore their confidence in it.

Condominium Definition – A condominium (or condo) – also know in some countries as an apartment or flat – is a building where individuals have freehold strata title of their own residential unit and where the common areas such as lifts, swimming pools and gyms are jointly owned by all the co-owners. In Cambodia, foreigners are allowed to own up to 70% of the total area of a condo building with the exception of the ground floor.

 

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Land and Investment, CBRE Cambodia MarketView in June 2014

June 2014 1 300x35 Land and Investment, CBRE Cambodia MarketView in June 2014

 

June 2014 86x300 Land and Investment, CBRE Cambodia MarketView in June 2014LAND AND INVESTMENT OVERVIEW

During the Khmer Rouge period from 1975-1979 the land title system was completely abolished and all records of previous land titles were destroyed. The land titles system was not re-introduced until 1992 when the land law was passed, enabling people who have lived on the same piece of land for 5 years to qualify for titles. Currently, land in Cambodia is either owned privately or by the state but not all land is registered as the land system remains underdeveloped. Investors are advised to check whether a proper land title exists.

Land titles are represented in two forms soft and hard title. Soft title refers to a title where a property is registered at the local municipal level but which cannot be used as collateral for bank loans while hard title refers to a title issued at the national government level which can be used a collateral for bank loans. Hard title is the most secure form of ownership. However, the majority of transactions still occur for land with soft title to avoid high transaction costs which include property registration taxes and ownership transfer fees. Private freehold ownership is permissible for all types of land but the full ownership is restricted to Cambodian citizens or companies with the majority of shares being owned by Cambodian citizens.

Foreign investors are not allowed to acquire freehold land unless a land holding company is established with at least a 51% share controlled by a Cambodian citizen or company. Foreign investors can also use land in Cambodia under a long term lease. The maximum lease term is restricted to 50 years determined by the civil code established in December 2011. The lease structure system allows foreign investors to lease property if the property is properly registered with a land title certificate.

TAXES

Property Tax is levied on all property worth over KHR 100 million (US$24,000) in Cambodia. The tax is payable annually by the owner of the property at a rate of 0.1% of the government assessed value.

Unused Land Tax is payable for all unused land. The tax is calculated at a rate of 2% of the market value of the land per square meter as determined by the Unused Land Valuation Commission of the Ministry of Economy and Finance. The unused land tax is paid annually by the landowner.

Property Transfer Tax is levied on a sale of land with Hard Title, at 4% of the assessed property value determined by the tax department, by the purchaser.

INVESTMENT ANNOUNCEMENTS

A number of significant developments / transactions were announced or launched in 2014, as follows:

HLH Group announced that D’Lotus Development Ltd, of which it holds a 49% stake, entered into a Sale and Purchase Agreement with Shukaku Inc. to acquire 13,541 square metres of freehold land in Boueng Kak, Daun Penh, for US$14,895,000 (app. 1,100 USD per sq.m). The land is to be acquired for the purpose of a developing a mixed use scheme comprising office, residential and retail accommodation.

Plans to develop a new ‘Grade A’ office tower were announced by a group of investors, operating provisionally under the name of  ‘Kingdom Luxury Development Co.’ to develop a 25-storey office tower on Norodom Boulevard.

Oxley Holdings, with their partners World Bridge Land, commenced off-plan sales of the both the condominiums and the ‘SoHo’ units for their mixed-use development, The Bridge, located by the Australian Embassy in Tonle Bassac Commune.

City Star announced an extended minimum guaranteed yield of 6%, for a five year period, on all one-bedroom villas on Alila Villas Koh Russey. The decision was made due to strong projected revenue forecasts for the luxury-island resort.

Times Centre is shorty due to commence sales of the condominiums units within the mixed-use development located by Olympic Stadium.

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Hotel and Tourism, Cambodia – CBRE Cambodia MarketView in May 2014

 Hotel and Tourism, Cambodia   CBRE Cambodia MarketView in May 2014

CAMBODIA’S TOURISM SECTOR CONTINUES TO EXPAND WITH INCREASE IN INTERNATIONAL ARRIVALS

May 2014 89x300 Hotel and Tourism, Cambodia   CBRE Cambodia MarketView in May 2014

OVERVIEW

The Cambodian tourism sector continued to enjoy steady growth over the course of 2013, with the number of international arrivals increasing by 17.5%, to a total of 4,210,165, up from 3,584,037 in 2012. The average length of stay also increased to, 6.75 days, up from 6.5.

Average hotel occupancy rates in 2013 rose to 69.53%, up from 68.49% the previous year.

The current REVPAR (Revenue per Available Room) in the four and five star hotel market in Phnom Penh ranges from US$25 up to US$100.

Siem Reap remains the most popular destination for tourists entering Cambodia, with arrivals into Siem Reap International Airport accounting for 28.1% of all arrivals, compared to Phnom Penh at 19.9%.

Tourism to Sihanoukville is expected to increase over the coming years, with frequent flights available from Siem Reap and with the delivery of new luxury hotel accommodation off the Sihanoukville coast.

HOTELS

Future supply is set to increase, with the completion of the Sohka Hotel and Naga 2 in Phnom Penh.

Sohka is set to launch approximately  450 rooms onto the market and Naga 2 is set to deliver in excess of 1000, increasing Phnom Penh luxury hotel supply by 70%.

Alila Villas Koh Russey is set to deliver Cambodia’s first internationally branded Island resort, located off the western Cambodian coast, in close proximity to Sihanoukville. This will build on the success of Song Saa Private Island, launched in 2012.

TOURISM

The planned expansion of both Phnom Penh and Sihanoukville International Airports will support the growing number of international arrivals, with the capacity of at both airports set to approximately double over the coming years. Both airports will be able to accommodate up to 5 million travellers respectively, per annum, up from their current capacities of 2.5 million.

 Hotel and Tourism, Cambodia   CBRE Cambodia MarketView in May 2014

Tourism statistics

Tourism accounted directly for 10.4% of Cambodia’s GDP in 2013, a rise of 6.9% from 2012 and significantly higher than the Asia Pacific average of 2.3%. Tourism in Cambodia currently contributes a greater relative proportion of GDP than any other ASEAN economy. Total foreign arrivals increased by 17.5%  Y-o-Y, with arrivals from Loas and China (PRC) growing significantly, by 63.2% and 38.7%, respectively.

Tourism is anticipated to account for an increasingly large proportion of Cambodia’s overall GDP between 2014-2024.

Compared to the figures from 2012, the share of arrivals via land and air remains consistent, with land arrivals accounting for 50.3%. This can be attributed to visitors entering from neighbouring countries Laos, Vietnam and Thailand.

As in previous years, Siem Reap International Airport has the highest share of arrivals at 28.1%, with 19.9% of arrivals attributed to Phnom Penh.  According to the Cambodian Government, approximately US$80 million will be invested to expand the international terminal in Phnom Penh and US$100 million will be used to upgrade Siem Reap International Airport.

 Hotel and Tourism, Cambodia   CBRE Cambodia MarketView in May 2014

 

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Industrial Market, Cambodia – CBRE Cambodia MarketView in April 2014

 Industrial Market, Cambodia   CBRE Cambodia MarketView in April 2014

 

INDUSTRIAL MARKET REMAINS STABLE, WITH CONTINUED FOREIGN DIRECT INVESTMENT IN MANUFACTURING

 

April 2014 86x300 Industrial Market, Cambodia   CBRE Cambodia MarketView in April 2014Introduction

Cambodia remains an attractive destination for foreign direct investment in manufacturing, with low inflation rates of 2.9% and comparatively low minimum wages. Cambodia’s industrial output grew by 9.5% over the course 2013,  the 17th highest industrial growth rate globally and above wider Cambodian GPD of 7.3%. The impact of recent unrest amongst garment workers, and the subsequent raising of their minimum wage, appears not to have significantly diminished demand for industrial space in the short-term.

Imports

Cambodia’s principal imports remain that of finished goods with the main products being petroleum, cigarettes, gold, construction materials, machinery, motor vehicles and pharmaceutical products. Imports reached $8.895 bn in 2013, up from $7.965 bn in 2012.

Exports

Cambodia’s principal exports are clothing, timber, tobacco, cassava, fish and rice. The country’s exports amounted to $6.781 bn in 2013, up from $6.016 bn in 2012.

Rents

Factory rents in most Asian markets – particularly China – continued to record steady gains in Q1 2014 along with the improvement in regional exports. In Cambodia rents are generally stable as a continuation of trends seen in  2013, with prime locations in industrial zones commanding rents of $2.5 p/sq.m.

Rents in lower quality industrial zones, where units are of a lesser standard, stand at $2 p/sq.m.

Supply

There remains a distinct lack in the  supply of light industrial building  as occupancy levels in existing industrial zones remain high. There remains a limited number of Special Economic Zones (SEZ’s) where developers have built warehouses available for rent, whilst a limited number of developers are willing to ‘build to suite’.

Build to suite units are generally held on long-lease terms of 10-30 years.

Demand

Increasing labour costs in China and Japan continue to drive the demand for industrial property within Cambodia. In addition to this, increased minimum wages for factory workers in Thailand may in the future prompt cross border relocations into established industrial zones in the north of Cambodia at Poipet, and to the west of Cambodia at Koh Kong.

Each of these bordering economic zones are linked directly to the reliable Thai electricity line.

Take-up is steadily increasing across the Special Economic Zones (SEZ’s), which are seeing the number of Japanese and Chinese occupiers increase significantly, with both nations investing heavily into the SEZ’s in particular.

The opportunities to relocate to Cambodia in search of better production prospects are supported by the improving infrastructure, in particular the deep sea port of Sihanoukville and its neighboring economic zone. Sihanoukville also has the perceived advantage of being outside of any future political unrest in the capital.

Future Supply

The supply of industrial units will be a key influential factor in the growth of Cambodia’s economy, ensuring that foreign direct investment (FDI) can continue to drive the markets. A number of industrial zones have been proposed for development within sites acquired for the purpose of satellite cities. These industrial zones will provide industrial units to the North, South, and North West portions of Phnom Penh, and will cover approximately 7,000 hectares of land in total. They will be supported by revolutionized infrastructure enabling further development of import and export opportunities. These developments are still likely to focus more on freehold disposals than matching market demand and supplying rental units. This can largely be put down to the low returns achieved from current rental prices.

Overview

The World Bank forecasts 3.2% worldwide annual growth over the course of 2014, up from 2.4 in 2013, driven by the anticipated economic recovery in the United States, the Eurozone and Japan. This bodes well for the Cambodian industrial market, as they collectively comprise the clear majority of consumers of Cambodian exports. Recent political unrest amongst garment factory workers, and the subsequent raise of their minimum wages, may prove to have an impact the long-term growth of the industrial market.

The demand for industrial rental units in prime locations remains high in 2014, as Chinese and Japanese companies look to relocate due to high production costs in their retrospective countries. Although the increased demand is unlikely to be met by future industrial parks, Special Economic Zones (SEZ’s) are becoming an increasingly popular alternative to the established industrial parks.

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