Condominium sales have plummeted by 50 percent, real estate developments are stalled and the central bank is working to rein in debt, the Finance Ministry reported yesterday in its first official biannual review of the economy.
“There is an urgent need to stabilize credit growth at a sustainable pace to facilitate the soft landing of the country’s real estate market,” the report says.
The Cambodia Macroeconomic Monitor is the first public report the Finance Ministry has released that reviews all sectors of the Cambodian economy, according to Secretary of State Vong Seyvisoth. Previously, official assessments of the economy had to be gleaned from disparate government presentations.
Dampening the country’s rising indebtedness is one of the National Bank of Cambodia’s “most challenging tasks,” the report says. It expresses relief at the bank’s tightening of lending policies, an acknowledgment that the country’s glut of property developments, fueled in part by easy lending, are a risk to the economy.
The National Bank has taken a stricter stance on bank licensing, increased reserve requirements and addressed credit risks by introducing a new reporting system, the report says.
Beyond its warnings of a credit bubble, the report also notes that sales of condominiums plunged 50 percent in the first six months of the year, while those of gated communities dropped by 30 percent.
“Real estate developers are adjusting to the excess supply by either postponing some planned real estate construction projects or by outright canceling some of the projects,” it says.
Through 2018, developers will likely focus only on finishing current projects, rather than launching new ones, it says.
Chea Kok Hong, deputy director of the Finance Ministry’s macroeconomic and fiscal policy department, said that postponed and canceled developments were a welcome correction in the market.
“The risk of oversupply has been reduced as the market adjusts to the amount of demand,” he said.
Bank officials and property agents were also supportive of National Bank measures to rein in debt.
“They make banks consider more seriously the incomes of property buyers…to prevent loan defaults,” said In Channy, the chief executive of Acleda Bank.
Chrek Soknim, CEO of Century 21 Mekong, said lax property lending could result in bad debt and hamper the economy.
“So I think it’s reasonable to have such regulatory and supervisory measures,” he said, adding that loans for condominiums are particularly high-risk because they are often built and sold based on economic projections.
A Century 21 report released last month says there was a surge of condominium launches in the first half of the year even as foreign buyers shied away from the market due to political instability.
Phnom Penh’s The Bay project, a $500 million mixed-use development, has reportedly canceled its plans to build residences due to a limited market for them.