Amid the thousands of near-identical new shop houses built side-by-side in Phnom Penh during the property boom and after, Chan Rattha said she’s ready to move on, but she wants to sell her shop house at a 70 percent mark-up first.
Like many people, Chan Rattha bought her property as a speculative investment during the recent property boom, when houses were being sold over and over for ever-increasing profits. Though her two-story shop house cost $50,000 more than a year ago, Chan Rattha is still hoping to sell it at a large profit.
“I just want to sell it for $85,000, but if someone wants a bargain at $80,000, I’ll think about it,” she said, adding that some potential buyers have looked, but that no one has made an offer since the middle of last year. And, she added hopefully, “I want to make a big profit.”
But real estate agents say that shop house owners like Chan Rattha will soon realize that the days of big payoffs on property are over, at least for the moment.
“They buy cheap, and they want to double and triple it, but now the market is down,” said Sear Chai Lin, director of Visal Realty. “They might have to sell at the same price [they bought for]. There is no demand,” he said, adding that real estate prices across the city have dropped 40 percent or more since mid-2008.
Sear Chai Lin said that with thousands of shop houses—the narrow, cookie-cutter buildings with open fronts—still under construction, there’s little reason to think prices will go up anytime soon.
Siev Sophal, managing director of Time Property, said the multipurpose shop house, which can be used for parking cars, running businesses, or living in—or for all three at once—was a prime target of real estate speculators during the boom.
“People in the last few years, before 2008, in 2006, 2007, they bought shop houses for speculation,” he said. “ They did not consider cash flows, they expected capital gain,” said Siev Sophal, adding that many of those people will need their invested cash back and may have to settle for a lot less than they expected.
But many are still holding out for large returns.
Lun Kikrik said he needs $55,000 for his shop house located on a dusty quiet street near Tuk Thla market. He bought the property in early 2008 for $35,000, and now he regrets not having accepted the offers of $70,000 he received from potential buyers just last July.
Now there are no buyers, said Lun Kikrik, who, like many Cambodians, bought his property outright with cash instead of loans and is now stuck for cash.“I need the money now. I can only eat salt now,” he joked. Lun Kikrik said that if he could sell his shop house, he would buy a bus and start a company, though he still wouldn’t sell for anything less than a hefty profit. “It is my pride,” he said.
Taing Sunly, who bought a shop house just off Russian Boulevard in 2005 on speculation for $60,000, said he wants to sell his the property for $180,000.
“I have owned it for four years, and it’s a good location, so I think it’s impossible that the price will go down,” he said. And Kim Ty, who owns a nearby shop house, said he was willing to wait to make the profit he expects.
“I am not worried about the price of my house,” he said. “My house is in the commercial area, so its price is still high despite the crisis.” But Suos Chenda, managing director of LPA real estate, said it could be several years before shop house properties can be sold at profit. Sale prices of shop houses have already declined by 50 percent in some parts of Phnom Penh, and the shop houses of west Phnom Penh, around Tuk Thla market and the airport, have been hit particularly hard.
According to Suos Chenda, properties purchased between 2007 and 2008 were particularly overvalued, and they will take much longer to increase in value since they doubled and tripled in price over such a short period.
Matt Rendall, an investment adviser at Sciaroni and Associates law firm who specializes in real estate, said in an interview last month that it may yet take time for property owners to realize that the days of big profits are over.
But those who were priced out of the real estate market during the boom may not be able to afford housing when the selling off begins. “The property boom led to enormous supply of good quality affordable housing,” Rendall added.
