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Phnom Penh Condominium Market – CBRE Cambodia MarketView in August 2013

PHNOM PENH CONDOMINIUM MARKET IS BOOSTED BY HIGH SALES RATES, PROMPTING FURTHER CONSTRUCTION

August 2013Introduction

The condominium market in Phnom Penh is still very much within its early stage of development and thus is unlikely to flourish until there is a cultural shift towards owner occupants relocating to condominium developments within the city.

This however will be heavily dependent on the urban expansion of Phnom Penh, whilst also making considerations to the rate at which the cities population increases, and the rate at which urbanization in the city continues.

CBRE has see an increase in investment from both Japanese and Chinese clients that do not expect a high level of return upon their investment, and rather are investing on the basis of speculative capital growth.

Currently, there are 18 Condominium projects in Phnom Penh, inclusive of both finished developments, and developments under construction, with the main developers including De Castle and Canadia.

The construction market has responded to a lack in high quality condominium developments being provided within central Phnom Penh. With a number of new developments set to come online at the end of 2013, and through until 2016.

Supply

Although Phnom Penhs condominium market supply increased in 2012 by 29.25%, the market for condominium developments is still meeting current demand, if not slightly over-supplying the market.

The economic downturn is still heavily effecting investor input into the market, directly effecting the supply of condominiums developments in Phnom Penh. With a number of planned condominium projects now classed as ‘offline’ (awaiting review), suppliers have been cautious in their attempts to bring new projects to the market.

In 2014 three new condominium projects will be completed, supplying inevitably, products that are under supplied. It is apparent throughout Phnom Penh however that although the market is not booming, there is a need for high quality condominium developments – De Castle, I240, and HK Condo will provide for this.

In the following two years a further 4 developments will be coming online, again supplying high quality products, focused towards investors, whilst a number of projects are under construction, most notably at the Booyang Khmer site on Russian Boulevard, where 85% of the development will comprise condominiums.

Sales

Sales of condominiums in Phnom Penh have been heavily marred by publicized failures of developments that have been sold of plan and have subsequently ceased construction. This has put many potential investors off the market, however in 2013 there has been a slight rise in condominium sales when compared to respective figures in 2012, showing albeit slight, but confidence in the condominium market once again.

Sales levels vary across Phnom Penh, however in accordance to finished projects a notable high in sales rates of 95% has been achieved. These sales are generally as previously mentioned to Cambodian nationals looking to take advantage of products available at an attractive rate.

Developments that are still currently under construction have sold between 10%-60% off plan. Most notably seen at the Di Rivera development currently under construction on the evolving diamond island.

Canadia who are developing Di Rivera and have previously developed Rose Gardens Condo’s, asking sale prices of $1,500/Sq.m, with De Castle asking $2,000/Sq.m, however it must be noted Canadia are selling the most condominiums in the market place.

Generally condominiums within central Phnom Penh asking sale prices of $1,500-$2,000/Sq.m, with condominiums located on the outskirts of Phnom Penh (e.g. Toul Kork/ Chroy Changvar) asking sale prices of $500-$1,000/Sq.m

Demand

Demand for condominiums is anticipated to increase and be met by supply in 2014. The introduction of high quality products in downtown locations will offer prospective investors and opportunity to acquire products that focus on the needs and requirements of a heavily expatriate driven area of Phnom Penhs residential market as foreign nationals continue to require exclusive and up market accommodation in popular locations.

Following the global financial crisis in 2008 when the condominium market dropped significantly, although greater yields can be achieved elsewhere, the influx of desirable products will further develop the market for condominiums into 2014 and onwards.

Overview

Overall the condominium market in Phnom Penh has been supplied on a basis of relatively cost effective products that provide nominal rates of return, that have been predominantly purchased by Cambodian nationals. The market in Phnom Penh is currently supporting its current level of supply, however it is expected with the introduction of high quality products in 2014-2016, to strengthen in accordance to both Cambodia’s stability, but also in line of global financial stability projections.

Although these projections are still very much unsteady, it is hoped that the introduction of De Castle Royal, I240, and HK Condo’s will not only offer foreign individuals and investors a product that they desire. With Overseas Cambodian Investment (Canadia) developing Di Rivera Condominiums that have thus far been successfully sold of plan, it is anticipated that further development’s that are currently under construction such as the centrally located Olympia development, and others such as Galaxy Condo’s and Bali Resort being equally successful. The expansion of Phnom Penh will inevitably further drive the increase of condominium yields.

CBRE note that a number of individuals and corporate companies and organizations are making considerations towards the construction of further condominium developments, instilling 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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