Market Data Show Contours of Emerging Cambodian Middle Class

Cambodians living in major cities are leaving home earlier, buying more homes and filling them with a greater variety of goods.

The findings, contained in October’s Cambodia Market Monitor released last week by the marketing firm Indochina Research, appear to show that Cambodia’s urbanites are now able to afford slightly more elbow room and to satisfy more of their consumer desires.

By leaving the family home sooner, university students and first-time employees are driving down the size of urban households, according to Indochina Research’s monitor, which will be published quarterly in 2008.

Between 2003 and 2007, the average size of an urban household dropped from 5.6 to five people, creating new entrants to the housing market, driving up real estate speculation and demand for household durable goods, the monitor said.

The monitor also found a slow but steady rise in consumer confidence after a spike during the Khmer New Year in April, and the emergence of a $24-million market for the education and entertainment of 675,000 urban children under 10.

The number of television ads in the first nine months of this year was up 18 percent to total 292,244, while beverages and beauty and hygiene products accounted for 30 percent of television advertising revenues.

Laurent Notin, Indochina’s research director, said the data indicates the “starting points of a middle class.”

“There’s an impression that people are spending more and more and that the basket of goods is growing,” he added.

However it remains difficult to say whether such consumer trends extend into Cambodia’s impoverished rural zones, where comparable data are scarce, he said. Between 1993 and 2004, consumption in Phnom Penh grew by about 30 percent and was spread fairly evenly among economic strata, according to the World Bank.

Consumption growth in rural areas during that period was “highly concentrated at the extreme top end,” the World Bank mentioned in its equity and development report in June.

According to economist Sok Sina, there is currently no definition for a Cambodian middle class. “We do not have any category to define middle class,” he said. “We just define poor and non-poor.” However, there are circumstantial indicators, such as the number of cars on the road or retail outlets and customers, which indicate broader affluence in Phnom Penh, he said.

In Channy, president of Acleda Bank, said last week that the bank’s activities appeared to detect the presence of a middle class, however defined.

Acleda’s mortgage lending since November 2006 stood at $29 million—10 percent of Acleda’s lending portfolio.

In that period, the price of a square meter of real estate along Phnom Penh’s Monivong Boulevard has growing tenfold to reach $2,500, he said.

“To me, that’s a lot because we’ve never had that,” In Channy said of the level of mortgage borrowing.

Increasing numbers of young couples are seeking to borrow against the value of their new homes, he said, adding that stability in the housing market will depend on Cambodia’s economic performance.

“I feel confident it won’t collapse in the next five years. We should be careful after the next five years to come,” he added.

 

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