Property price in Phnom Penh are rising for the first time since 2009, growing by as much as 10 percent in some areas of the capital during the first quarter of the year, real estate experts said yesterday.
After years of stagnation in the property sector due to weak demand following the global financial crisis, data from the National Valuers Association of Cambodia (NVAC), shows that the cost of both residential and commercial properties are beginning to increase in the city.
“Prices have increased between 5 and 10 percent for both commercial and residential properties in the first quarter,” said Sung Bonna, CEO of Bonna Realty and NVAC’s president. “The situation of the economy is good, and foreign investors can see that.”
Residential property prices around the riverside at the beginning of the year averaged between $2,000 and $3,500 per square meter. Prices there now are reaching as high as $3,850 per square meter, according to the NVAC data.
In Chamkar Mon district south of Sihanouk Boulevard, prices in January were between $1,000 and $1800 per square meter depending on the quality of the property but prices have now risen to as much as $2,000 per square meter.
Property prices increased as much tenfold from 2005 to July 2008 with the most expensive land in Phnom Penh rising to as much as $5,000 per square meter. But that growth was mostly fueled by speculation and the property bubble burst in late 2008.
Keuk Narin, vice president of Asia Real Estate Cambodia (ARC), said the part of the reason for the upward trend in prices was due to higher investor demand and banks giving more mortgages. He also said more foreign investors were beginning to take advantage of the foreign ownership law for condominiums, which came into effect in 2010.
According to figures from the ARC, there are currently 16 condominium property projects in existence or being built in Phnom Penh. Once they are all complete there will be a total of 3,193 units available for sale.
The ARC said, about 75 percent of the units had been sold, and 80 percent of the buyers were foreigners.
Although condominiums compose only 15 percent of the total residential market in Phnom Penh, Mr. Narin sad demand for such projects looked particularly strong, with prices in some units having increased by 15 percent in the first quarter of the year.
“But it is not only condominiums shop houses, other residential [buildings] and most commercial property is up 5 to 10 percent,” Mr. Narin said. “People are becoming more confident in the market.”
Mr. Narin added that grade A condominiums are currently selling for an average of $1739 per square meter, while grade B and C condominiums are selling for an average of $1014 and $770 per square meter, respectively.
Whether this is the beginning of another property boom remains to be seen.
Bank officials also said that demand for housing loans was increasing.
“I think most of the banks are giving more housing loans at the moment, and where one of the reasons is that foreigners are buying property, the other is that… banks view property as a safe sector to go into, especially ownership,” said Phan Ying Tong, country head for Cambodian Public Bank.
Despite the encouraging signs, observers say property developers should be wary of repeating the errors of the past.
“There was a lot of speculation on land here and that was slightly unrealistic,” said David George, country director for real estate firm CB Richard Ellis.
“In today’s market, there is still all the risk of developers not looking at the market correctly and oversupplying it.”.