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Residential villa & shop house market, CBRE Cambodia MarketView in November 2014

November 2014

STRONG OFF-PLAN SALES CONTINUE TO DRIVE RESIDENTIAL DEVELOPMENT ACTIVITY ON OUTSKIRTS OF PHNOM PENH

November 2014 - 1Introduction

The villa and shop house market has continued to expand over the course of 2014, with healthy off-plan sales levels prompting further development activity.

New high quality supply continues to enter the market, with development activity focusing around secondary locations on the outskirts of Phnom Penh.

Supply

The supply of new ‘borey’ developments has continued to increase over the course of 2014, with predominantly local developers launching sales of projects located in the north of Phnom Penh.

The standalone villa market remains active, both in terms of sales and residential leasing. Villas with land plots in excess of 500 sq.m remain a sought-after asset, with investors looking to acquire sites for mid to high-rise developments, due to the shortage of reasonably priced, centrally located vacant land plots.

The resale market for existing individual villas remains buoyant, with a steady flow of villas offered for sale in central areas of Phnom Penh.

2014 has seen iconic colonial villas offered for sale, such as The Mansion, an early 20th century residence located behind the FCC overlooking the Royal Museum, currently on the market and ‘No Problem Villa’, located on Street 178, which successfully transacted in Q2, 2014.

Demand

Demand for villas and shop houses within ‘borey’ developments remains strong, driven principally by Cambodian nationals able to take advantage of staggered payment options and in-house finance schemes.

Shop houses, comprising upper floor residential accommodation and ground floor retail space continue to be a popular option for Cambodian nationals, due to their relative affordability and the option of using the unit for business purposes in addition to residential accommodation.

Sales and Rents

Off-plan sales rates remain encouraging, with prices ranging from in the region of US$400   to US$1,800 per sq.m, based on Gross Internal Area (GIA) for residential villas and shop houses within ‘borey’ developments.. Achieved rental rates for villas in prime residential areas, such as BKK1, have risen over the past 12, with rent payable ranging from US$3,000 to US$4,500 Per Calendar Month (PCM) for standard sized villas.

November 2014 - 2

Overview

Overall the demand for villa and shop houses in Phnom Penh remains high, stemming principally from increasing urbanization and rising standards of living. The successful sales rates of recently completed schemes, in addition to projects currently under construction, gives testament to the strength in demand for quality villa and shop house residences.

The vast majority of current development activity takes place in secondary locations outside of central Phnom Penh. This is principally due to the scarcity of centrally available land and the high cost per square metre in primary locations. Whilst the healthy rates of sales are positive endorsement of the market, increased development and activity on the outskirts of the city will continue to place greater strain on Phnom Penh’s underdeveloped road and wider transport infrastructure.

Whilst off-plan sales are the principal means of disposal, both resale and rental markets, particularly within prime residential areas, remain strong. Over the past 12 months BKK1 has seen the most significant increase in both achieved rental rates and capital values, driven by demand for villa accommodation for both commercial and residential uses and the acquisition of villas for the purpose of redevelopment.

Given the location and quality of current pipeline developments, it is likely that strong off-plan sales rates and absorption of developed stock will continue over the course of 2015, with the fundamental drivers of demand, in the form of urbanization and rising standards of living, likely to continue to support both sales rates and the development of new projects in the short to mid-term. Whilst with the volume of future planned projects, due to the increasing popularity of allocating domestic capital into residential development, in addition to the lack of development controls, oversupply remains a risk, it is likely that rising demand will continue support increasing supply through to 2016.

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