After more than a year of soaring growth, land prices appear to have stabilized, officials in the business community said Tuesday, citing a curb on bank loans and July’s national election among a host of likely reasons.
The slowdown began in May after the National Bank of Cambodia doubled bank reserve requirements to 16 percent. The government introduced the reserve increase—the amount of total cash deposits banks must keep at the central bank—as a move to curb the country’s double-digit inflation by reducing credit to the private sector.
But the plateau in land prices also coincides with concerns about political stability as investors await the outcome of the national election before they resume purchasing property, some businesspeople said.
Sung Bonna, president of Bonna Realty, said his company has not completed a report on property prices since April but have one planned for release in July. If things continue as they have of late, he said, that report will show prices having hit a plateau.
He added that the leveling off of what were skyrocketing prices is likely a positive thing.
“The price is stable not only in Phnom Penh but also across the country,” Sung Bonna said, adding that land speculators, who have been driving up prices but not actually developing land, will be most affected.
The beginning of the rainy season, which makes travel in the provinces more difficult for buyers, is also another reason for the leveling off, he said.
But concerns about political stability and what kind of government will form after July are key, he added.
“People want to know the situation,” he said.
Hak Buntham, general manager of the real estate company Borei Neysovann, said after so much growth he was surprised by recent settling in prices. For the last month or so his company has had trouble selling houses, he said, adding that property prices have settled but not dropped.
“There hasn’t been a remarkable decline, yet,” he added.
Debasish Pattnaik, director of business development, project and investment at the Royal Group, said that land prices were bound to level off after so much growth.
Foreign investors have been responsible for some of the price increases, he said, but as many of them have become more familiar with the business landscape here, they have become more savvy about prices.
“It was more of a seller’s market but not anymore. The buyers are better educated. They know what is going on. They are shopping around,” he said.
Land has been overpriced and now the market is settling and could very well reverse, Pattnaik said, adding that other factors, such as the reserve requirement have made an impact.
“That has put a clamp on land speculation and land financing,” he said.
In Channy, president of Acleda Bank, said the higher reserve rate means that loan criteria have been tightened, limiting loan access to both developers and potential homebuyers.
“It means less money for developers,” he said, adding that this will translate into reduced economic growth for the country.
The amount of loans Acleda issues every month continues to increase but it has slowed considerably since May, he said.
Acleda issued $358 million in loans in January and $390 million in February, an increase of $32 million.
In comparison, the bank lent $436 million in April and just $438 million in May, an increase of only $2 million.
Depending on the bank, the restrictions have affected a range of clients from lower-income homebuyers to developers, In Channy said.
Acleda, which focuses on smaller loans, has put more restrictions on multi-million-dollar loans, he said.
He also predicted that the slowdown would continue as long as the reserve rate holds at 16 percent, which he said is far higher than the average around the region.
CPP National Assembly First Vice President Nguon Nhel predicted the situation will change after the election.
“It is calm for a while during the election,” he said.
“After the election there will be political stability…. There will be development, and the land price will become more expensive.”