Realestate.com.kh (REAKH) hosted a seminar titled '2024 Property Market - The Untold Story' on February 22, 2024, at the J-Tower 3 Showroom in Phnom Penh. The seminar featured a look at current real estate trends from the perspective of the banking sector, and a data-centric analysis of the condominium market, based on REAKH's comprehensive database of over 500 property sales over the past two years.
Cambodia’s Real Estate Trends Through The Lens Of A Bank
Banking Sector Stimulating Economic Activity
Sophoan Rath, CEO and Country Head of Maybank Cambodia, delivered an examination of real estate from the vantage point of the banking sector and explained the pivotal contribution of real estate and construction to Cambodia's GDP growth. He noted a stabilisation in the banking sector in 2023, relative to the year prior, despite encountering hurdles such as “probably the lowest or the slowest credit growth in two decades” at 4.8 per cent, consequent to the aftermath of the COVID-19 pandemic and other external economic pressures.
Speaking with B2B Cambodia, Rath reassured that “the overall health of the banking industry in Cambodia is still sound”, despite the challenges posed by the economic slowdown. While acknowledging that non-performing loans are “creeping up a bit”, he said they are still at “manageable levels”.
He further stressed the importance of continued lending by banks to stimulate economic activity and address challenges like escalated interest rates and funding costs. He mentioned regulatory measures had been put in place by the National Bank of Cambodia (NBC) to ensure liquidity, and underscored the importance of ethical banking and rigorous due diligence in project financing.
Banks are normally conservative when it comes to business, and we (Maybank) are a responsible bank. It is tough, but if I look at all the industry indicators, I don't see alarm bells at the moment. I do see that it’s quite challenging, but we've gone through this in the last couple of years… and the start of [2024] already looks a bit brighter compared to the previous year,” stated Sophoan.
Real Estate Growth, Construction And Mortgaging
The Maybank CEO emphasised the real estate sector's resilience and ongoing expansion and also noted signs of Cambodia’s transformation into a more mature market.
“Real estate itself, actually, compared to 2022, showed good growth at 16 per cent… [which] surprised me a little, because people have complained about the issues and challenges the real estate sector is facing,” he said. “On the construction side, growth reached 13 per cent, which is not bad. I think in a mature market, anything in the double digits is good growth. For us as a country, we used to have a high growth rate of 20 to 30 per cent, but… I think we as consumers need to realise that this period of high 20 to 30 per cent growth is over and is not sustainable.”
With a slight decrease in mortgage growth, yet maintaining a positive trajectory, Sophoan also highlighted the critical interplay between real estate growth and the mortgage and construction industries.
“When mortgage dips, real estate also dips… If you put the three [industries] together (real estate, mortgage and construction), it represents more than 30 per cent of the total credit of the country, which is quite sizable. [Mortgaging in Cambodia] basically only started around the mid-2000s, [but today] mortgaging has grown significantly and become one of the biggest contributors to overall credit growth… representing around 14 per cent of total credit,” he added.
Shifting Consumer Behaviour And Adapting To A New Context
Sophoan further explored demographic changes affecting the market, such as urbanisation and evolving lifestyle preferences, leading to a heightened demand for housing loans.
“People living in urban and city areas are almost 4.6 million out of the close to 17 million people we have. What is also consistent with a more mature market is that my fellow Cambodians stay single a lot longer… But the good news is that people tend to move out and start to own their own property even before they get married… this behaviour has, in fact, driven the demand for housing loans,” he said.
Sophoan pointed to Cambodia’s young, rising middle-class population and long-term digitalisation plans as key areas for investment and growth as all industries continue to adapt to the new post-pandemic context.
Charting Developments In Cambodia’s Property Market
Simon Griffiths, Head of Real Estate at REAKH, presented a data-centric analysis of Cambodia’s condominium market, based on data of over 500 property sales made by REAKH in the past two years, amounting to over USD $55 million in property value. 
Griffiths charted the development of Cambodia's condo market from its early stages in 2013 to the current day, through the impacts of global financial crises and the recent pandemic. He identified the changes in market dynamics, including the shift from predominantly Asian-Pacific investors to a significant surge of Chinese developers and buyers, which drove rapid growth in both prices and demand.
Addressing the Cambodian real estate market within the broader ASEAN context, Griffiths observed that, except for Singapore, Cambodia and its neighbours face similar challenges, with a general anticipation of recovery in the near term.
Oversupply And Reduced Demand
The COVID-19 pandemic marked the onset of a challenging phase, leading to a downturn characterised by reduced demand and a glut of supply initially intended for a booming market. Griffiths identified this period as a crucial adjustment phase, suggesting that the market is now “at the bottom of the trough” and poised for the onset of a new property and growth cycle, with signs of recovery already visible.
“What we've seen, whether it's residential, retail or office, is a vast amount of supply come on that was intended for a very hot market… but it’s coming at a time where demand is very dampened… and that has put a downward pressure on rents and sale value,” Griffiths told B2B Cambodia. “Then you have other situations like the Russia-Ukraine war and inflation which has made cash more expensive, so all of these pressures combined see us in a pretty subdued market at the moment.”
Return Of Competitive Pricing In Cambodia
Griffiths was clear the market still needs time to recover, but pointed out the return of competitive pricing for new projects as providing an optimistic future outlook and a prime opportunity for both developers and investors.
“Even though we might see a better day coming, a light at the end of the tunnel, I think 2024 is going to be painful,” he prefaced. “But for the residential sector, developers who are launching new projects can totally adjust to the new environment and scenario, as they can price their projects very competitively… prices are now below 2013 prices, which I think is a great opportunity. The few projects that are launching, only three in 2023 and three predicted in 2024, are doing very well because they've been able to recalibrate to the new conditions. So I think there's opportunities for investors, developers and buyers in the residential sector.”
Offering advice to developers and buyers, Griffiths emphasised the need for strategic planning and value addition by developers, while highlighting the current market as an advantageous investment opportunity for cash-ready buyers.
“Developers need to be extremely strategic, they need to study the market, give more benefits, they need to become more savvy developers. If they think they can build it and [buyers] will come, they won't, so developers need to know what they’re doing,” he said.
“For buyers, I think if you have cash, it is an absolutely fantastic time. Unfortunately, the last few years have been difficult for most people. Interest rates are very high, so borrowing is difficult. There are very good payment terms from the developers themselves. But if cash is king, if you have it, you can invest now, get some absolutely great deals, and in three to five years, you will be doing very well.”
More Regulation Needed In Cambodia's Real Estate Sector
Griffiths mentioned during his presentation that in terms of the real estate sector’s regulatory environment, he believes Cambodia still falls behind. He advocated for regulatory reforms to provide better protection for buyers and ensure developer accountability, aiming to foster a more stable market environment.
“I think there's a lack of regulatory mechanisms to protect the buyers in case developers don't honour their contracts,” said Griffiths. “Going to court in the current system is extremely burdensome, very expensive… I think there should be certain mechanisms whereby developers have to show proof of a certain amount of funds and that has to be raised. Those funds [could be] kept in almost an escrow mechanism so that there's a certain threshold you have to reach to be a developer to add more safety to the system.”
What we don't want is wild peaks and disastrous troughs, we want to be moving towards a more stable, less volatile property cycle and curve.
Speaking more on the direction Cambodia’s real estate market is developing in, Griffiths said he hopes to see the market become “bigger and hopefully tidier” as it has gone through a chaotic period over the past few years.
“I think the influx of development from China just happened in such a tsunami, it wasn't just a wave and it caught everybody off guard like it caught Sihanoukville off guard. The regulatory environment in Cambodia was sort of self-policed, and then this massive investment just washed over and everything became quite loose. So I think I'd like to see a more stable, more professional, and more regulated market, with better protection for buyers and investors. It's an evolution, and these things take time, but I think with every passing year, every passing property cycle, things will get better and better,” he added.