Mortgage Lending Rises for New Home-Buyers

Cambodians, particularly young adults, are more often turning to banks to help them buy their homes, according to figures obtained Wednesday from the National Bank of Cambodia (NBC).

The figures show that the amount lent by banks for mortgages has steeply increased after a slump when Cambodia’s property bubble burst following the 2008 global financial crisis.

From $179 million in 2008, the total sum lent out to house buyers fell to $94.5 million in 2009, the figures show. But in 2012, home loan lending reached $329.5 million—a 20 percent increase on the previous year—and by February it was at $344.5 million, according to the NBC.

The borrowing is only a fraction of total lending by the banks, which surged to $5.89 billion in 2012, compared with $4.39 billion in 2011. But representatives from the country’s four biggest banks all said that home loans were a growth area.

“The economy is now improving, living condition is also improved,” Acleda Bank senior vice president In Siphann, who is head of the bank’s credit division, said Wednesday in an email.

“People need to improve their living, or change [their] style of living, [they] want to live in modern housing: villa, apartment, condominium.”

Mr. Siphann said young married couples who desire their own home away from their parents are a major group taking out loans. Others may be trying to buy their own house while prices remain low, he added.

Acleda, the country’s biggest lender, has seen the number of bor­rowers getting home loans increase from 2,422 in 2010 to more than 4,550 in March, with the va­lue of the bank’s outstanding home loans reaching $97 million.

Acleda offers loans of up to 70 percent of a home’s value, and up to a maximum of $200,000, he said, adding that the default rate on such loans was very low—less than 0.3 percent of borrowers default and no homes had yet been foreclosed by the bank.

Canadia Bank CEO Michael Lor agreed that the growth in home loan lending was mostly due to “first-time buyers” and said it coincided with houses in new residential developments becoming available.

“This rising trend augurs well for [the] residential properties segment as affordability via financing…now reaches a wider segment of potential customers,” he said.

ANZ Royal Bank CEO Grant Knuckey said that although he could not share specific figures for the bank, home loans had been “growing pretty sharply.”

“It’s very strongly linked to overall economic growth-consumer confidence. People have a view that property is a stable investment and probably a performing investment,” Mr. Knuckey said. “Incomes are rising and there is a lot of aspiration in people. Home ownership [is] becoming a goal for young people.”

Mr. Knuckey said the volume of home loans was still small, since banks are still “relatively conservative on loan to valuation ratios”—the amount that is borrowed compared to the total cost of the home.

Such restrictions generally loosen up over time, he said. “I’m sure that will happen here, but [the market] needs to show some maturation,” he said.

Cambodian Public Bank Country Head Phan Ying Tong said the traditional attitude of years past—skepticism toward borrowing money—was beginning to change.

“In those days, many people wanted to buy with cash. Now many peo­ple use loans,” he said.

However, he said, the continuing scarcity of “hard” titles—authoritative documents confirming ownership of houses or land that could provide solid guarantees to lenders—would likely restrict the mortgage market’s development.

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