Phnom Penh authorities issued 16 percent fewer construction permits for buildings under 3,000 square meters in 2009 compared to 2008, according to the municipality’s annual report.
While construction slowdowns were highly visible at several high-profile foreign-backed projects throughout the city last year, the reduction in permits for smaller buildings shows the wide-ranging slump in the real estate sector in 2009.
Phuoeng Sophoan, secretary state at the Ministry of Land Management, Urban Planning and Construction, said construction tax revenues had been the government’s third main income after tourism and garments and speculated construction would grow as the economy recovers.
“In the Asia region, there are three countries interested in the construction sector in Cambodia thanks to the drop of labor and construction material prices,” he said, referring to China, South Korea and Japan. The reduction amounts to 382 construction permits, and does not include permits for buildings larger than 3,000 square meters which must be approved by the ministry.
With thousands of unoccupied and unfinished shop houses built during the property boom, Siev Sophal, the managing director of Time Property, said the over supply and lack of demand will likely mean that 2010 will also be another dismal year for small construction.
“Shop houses are in over-supply, such as the ones near the airport,” he said. He also said that banks have less interest in real estate loans following the bursting of the property bubble.
However, Sung Bonna, director of Bonna Realty Group, said the main problem facing the industry is a lack of demand, a problem which, if Cambodia follows the current global trend towards recovery, could end this year.
“There is an oversupply because of the reduced demand. During 2009 there was no demand. Depending on the timing of the market, we hope that this year the demand will be increased,” he said.
Still, he said construction will not return to levels in 2007 and early 2008 when real estate prices soared.
Ly Sophann, project manager for OPI Perfect Development Group, predicted that population and economic growth will restart a building trend that was temporarily stopped by concerns over the world economic crisis.
“Cambodia needs more development,” he said. “Those who have money always want to buy apartments for sale.”