Cambodia’s construction sector is again growing at a fast clip, with the value of newly approved investments in construction projects increasing by 72 percent last year, figures released Thursday by the government show.
According to data from the Ministry of Land Management, a total of 1,694 construction projects were approved last year, valued at a total of $2.11 billion.
That figure compares to $1.23 billion worth of approved investments in the construction sector in 2011 relating to 2,125 projects.
“We saw the number of projects in 2012 is less than the number of projects in 2011, but the investments were on more land, and the amount of capital invested increased,” said Lao Tip Seiha, deputy general director of the construction department at the Ministry of Land Management, adding that approved construction projects last year covered 6.5 million square meters, compared to 4.2 million square meters in 2011.
Mr. Tip Seiha said the majority of the construction projects were in Phnom Penh, but Kandal, Preah Sihanouk, Siem Reap and Battambang provinces also attracted a lot of investment.
“The majority of projects are buildings people will live in, such as apartments, villas and condominiums,” he said, adding that industrial buildings and restaurants also represented a significant part of the growth.
“We can say we now have a domestic market economy, and the demand is ever higher for buildings to live in,” he said, predicting that the level of growth in 2012 would continue this year.
More evidence of a construction boom was witnessed at the Phnom Penh Autonomous Port, where construction materials enter the city. A port official said earlier this month that construction materials represented a large part of the growth in goods coming through the port, which grew by 17 percent in 2012, compared with 2011.
Owen Williams, a surveyor at the global real estate firm CB Richard Ellis, said work had begun on a large number of new projects last year.
“The majority of current construction sites will be serviced apartments,” he said. “Condominiums are not far behind.”
“Rental rates and sales prices are stable if not growing in some sectors,” Mr. Williams added.
According to Deng Vuthy, a consultant at Bonna Realty, the most expensive properties in Phnom Penh’s Boeng Keng Kang 1 commune are currently priced at $3,000 per square meter, compared to $2,500 a year ago.
“It’s very expensive, but there is no land available,” he said.
The International Monetary Fund (IMF) said in a report earlier this month that construction had rebounded thanks to cheap and available credit for building projects. But the IMF warned that the growth of lending by banks, estimated at more than 30 percent for 2012, was nearing a level last seen before Cambodia’s property bubble burst in 2008. Prior to the bust, property prices in some areas of Phnom Penh had grown tenfold between 2005 and 2008.
John Brinsden, country adviser for Jardine Matheson, which owns several property projects around Phnom Penh, said the growth in credit was fueling the boom in the construction sector, though he said the credit boom was not a cause for concern.
“I don’t think that just effects property. There is a big increase in agricultural financing too,” he said.
Mr. Brinsden said the growth in construction projects was probably a reflection of the strength of Cambodia’s wider economy, and would include major projects like the Japanese-backed Aeon Mall project that broke ground in December, costing $205 million.
“We’re seeing much more diversification. It used to be garments, garments and garments. There has been a small but welcome diversification of the manufacturing base,” he said, pointing out the announcement on Wednesday that Japanese auto parts maker Denso would be setting up a factory in Phnom Penh this year.
Former ANZ Royal Bank CEO Stephen Higgins said the construction figures were likely inflated by some large projects that may never get off the ground, pointing out the unlikely possibility that almost $2.2 billion of Cambodia’s $13.68 billion economy was in the construction sector.
“Is construction really going to represent that proportion of GDP?” he asked.
And though the figure may be inflated, it did not mean there is no growth in the construction sector, Mr. Higgins said.
“Houses are going up, shopping centers are going up…. Within that figure I think there is no doubt that construction is booming.”