A 29-meter-high arched gateway topped with 18 life-size bronze stallions looms over potential property buyers at the entrance to Grand Phnom Penh International City.
Conjuring images of the Brandenburg Gate in Berlin, Grand Phnom Penh’s white arch is an impressive introduction to what is essentially a 260-hectare moonscape of bulldozed earth and ditches.
When the Russei Keo district project was unveiled in 2006 during the days of Cambodia’s property boom, Grand Phnom Penh’s proposed 4,000 residential villas and apartments had a projected cost of $500 million. The promotional material of the site’s developers promises the convenience of a shopping center and international school, surrounded by the beauty of ponds and manicured lawns, as well as a golf course and driving range.
Grand Phnom Penh is just one of about a half-dozen “satellite cities” that developers once promised would be the suburban getaways of Phnom Penh’s growing affluent population. But now, developers say they may be forced to scale back or delay their plans.
“The market is really bad,” Grand Phnom Penh marketing director Nhem Sothea said recently at his on-site sales office. “The market is not really up to expectation.”
“It depends on demand,” he said about the future of the project.
He and several other developers acknowledge that the various satellite city projects, which collectively are projected to cost more than $3.5 billion to construct, now face a different economic landscape than they saw just a year ago. Banks have restricted loans for real estate as property prices have dropped more than 25 percent. GDP growth for 2009 is being projected by most to be lower than 5 percent, a sharp change from the double-digit expansion the economy saw from 2004 to 2007.
Combined with the uncertainty of the world financial crisis, some say satellite cities can’t help but be affected.
Grand Phnom Penh is being developed by the YLP Group-which is owned by Mao Malay, the wife of former RCAF Commander-in-Chief Ke Kim Yan-in conjunction with the Indonesian firm Ciputra Inc.
So far, only 138 units, including 44 shops, have been purchased at Grand Phnom Penh, according to Nhem Sothea. And of the 4,000 units in the original plans, only 21 villas will be ready in April, followed by around 100 more units by the end of the year, he said.
The first phase was to include 500 units, but he said that goal is unlikely to be met.
Most of those that have bought homes at Grand Phnom Penh paid $99,000 for 42-square-meter terraced houses or $138,000 for 92-square-meter townhouses, Nhem Sothea said, but no one has yet purchased any of the more luxurious properties billed at more than $750,000.
And, he added, most of the sales occurred before the global economic crisis hit at the end of last year.
Demand has slowed, and it may now take eight to 12 years, according to Nhem Sothea, before this swath of land that was once a lake becomes the residential dream that the posters promised.
Within view of Grand Phnom Penh, the cranes are still busy at Camko City, a $2 billion, 120-hectare satellite project that originally boasted of plans for 6,000 units. The new economic situation, however, may force a rethink, said Kheng Ser, a marketing counselor for South Korean project developer World City.
Still, sales at Camko have been better than its neighbor Grand Phnom Penh, according to Kheng Ser, who said that 80 percent of the 1,009 units in the city’s first phase have been sold at prices of up to $330,000.
Camko’s first phase is a densely built complex of apartment towers, small villas and houses. According to Kheng Ser, the villas and houses will be completed in March and the tower blocks by the end of the year.
Designs are not complete on Camko’s much larger phases two and three, he said.
“It depends on demand. If we are not able to build we may reduce the residential areas and increase the commercial areas,” he said, adding, “We don’t know about next year yet.”
Sok Kong, president of local conglomerate Sokimex, said that he would delay plans on a 218-hectare satellite city called Beong Chhouk Township, but he brushed off the economic crisis as the cause, citing a land dispute as one reason for the delay.
“We drew the master [plan] a while ago,” he said. “I have to delay three or four years.”
He said he wants to focus resources on his $1 billion Bokor Mountain development in Kampot and his hotel project on Phnom Penh’s Chroy Changva peninsula.
“I have so much invested in the Chroy Changva hotel and Bokor Mountain,” he said.
On Koh Pich island in the Tonle Bassac river, where the satellite city plans appear to have been drawn by cubists and futurists, there is also doubt.
Investment could drop from $1.2 billion to $800 million by the Overseas Cambodia Investment Corporation for “Elite Town, Diamond Island City,” said Touch Samnang, project manager and architect. OCIC owns Canadia Bank.
OCIC is still building bridges to the island and no units are currently under construction, he said.
“I think it’s slowing down for all projects, not just OCIC projects,” Touch Samnang said. “Our master plan may change. It depends on the situation.”
That change may include dropping the number of units from 15,000 to 12,000 depending on demand, which has been affected by the global financial crisis, he said.
Elite Town’s brochure of proposed offerings include a hospital, shopping center, park and a series of homes that range in price from $280,000 to $1 million and sometimes include personal swimming pools.
So far sales have not gone as well as anticipated, he said.
Of the 168 units planned in the $28 million phase 1, buyers have purchased only 40 percent after more than a month of sales, he said. That’s a huge contrast over the past few years when units at other OCIC projects sold out in weeks.
Phase one will be delayed at least six months or until mid-2010, he said. The project could be finished in mid 2017, about 18 months behind schedule.
The economic situation has also stifled smaller projects.
At the proposed 500-unit, 5-hectare Dream Town near the Phnom Penh International Airport, only 30 units have been sold and its 2012 completion date will likely not be met, said Kong Vannsophy, manager of the project’s developer, Cambodia Priority Property Investment. “Work depends on the situation. If we rush and no people buy, we lose money,” he said. “A lot of other projects are facing these conditions.”
South Korean financed projects have faired some of the worst cutbacks and have faced trouble even getting off the ground.
The economic crisis leveled plans for a proposed $300 million, 953-unit Pharos Mekong satellite city on 5 hectares of the Chroy Changva peninsula, according to an e-mail from Kheang Piv, a marketing manager for the Korean-owned developer BK Asia Pacific.
After the global financial crisis began, Korean finance dried up and the company could not get the money it needed to move forward, he wrote. The company planned for construction to begin in December, but cancelled it in November, he said.
“It is not the right time for us to sell such kind of luxurious, high-end apartments. Eventually, we decided to keep our project on hold till the desirable time,” he wrote of the satellite city, which could include an international school, shopping mall, and restaurants.
In September the Korean firm Booyoung Company stopped planning a satellite city on a more-than-100-hectare expanse of land near Russian Boulevard because of uncertainty in the market, said Jong-seon Choi, general manager for Booyoung in Phnom Penh.
“We stopped because of the financial crisis,” he said. “It’s very uncertain, so nobody can say.”
Business experts say that satellite cities will continue to face obstacles.
After years of property values rising, real estate prices have dropped 25 percent in the center of Phnom Penh since July and 30 percent on the outskirts, where developers are constructing satellite cities, said Sung Bonna, president of Bonna Realty.
Sung Bonna said that a year ago during the property boom, investors were buying up all sorts of real estate with hopes to sell it later for a profit. But that has changed.
“Now even in general property in the city center there is not so much demand,” he said.
He predicted that prices will eventually begin rising again in the city center and that trend will later spread out to satellite cities.
Satellite city projects are still a good investment, he said, but only for long-term personal use.
ANZ Royal Bank CEO Stephen Higgins said risks have grown regarding demand for satellite cities because of their location in remote areas.
“You would have to expect that the downturn in the property market will have some impact in those projects,” he said. “By definition you are setting up in a new area, whereas if you set up in Phnom Penh you know there is going to be demand for it.”
ANZ will likely not loan money to borrowers seeking to purchase property in satellite cities.
“It’s difficult to say. We should not have a big appetite for it,” he said. “We want to see something built.”
But some are optimistic about the satellite cities.
Peter Kooi, a banking executive in Phnom Penh, said his Cambodian wife bought a $360,000 home on a pond at Grand Phnom Penh that will be ready in April, and he expects the investment to appreciate over the next decade.
“It’s understandable that it may move slow, but we don’t have concerns that it will not finish,” he said.
The capital’s need for housing will only increase and his home will only be 20 minutes from central Phnom Penh, not far when compared to commutes in other cities of the world, he said.
“If you think in ten years about Grand Phnom Penh, they will not be considering it a satellite city, it will be considered as part of Phnom Penh,” he said.
