Investor confidence in political stability for Cambodia is driving a surge in property prices in Phnom Penh, as developers and speculators snap up land and start construction work, estate agents and business experts said Monday.
In late 2003 and 2004, property prices in Phnom Penh rose 15 percent to 20 percent every six months, as investors awaited the formation of the new government with a degree of confidence, Tim Smyth, Indochina Research managing director said.
Following the government formation on July 15, 2004, confidence increased, and money moved from land speculation to construction work, he said.
“The only thing you can say about Phnom Penh is that it is expanding,” he said.
In the next five years, property prices in the city will likely rise several hundred percent, especially around Tuol Kok district, the Boeng Keng Kang communes in Chamkar Mon district, and the riverside, Smyth said.
Construction projects have sprung up in recent months along the river front and on the outskirts of the city center in Russei Keo district, where Phanimex Co Ltd is building a new headquarters for the Municipal Police, in exchange for their current headquarters near Phsar Thmei.
Land around Northbridge Communities in Meanchey district’s Stung Meanchey commune jumped 100 percent from December to January, from $50 per square meter to $100, said Sung Bonna, director of Bonna Realty Co Ltd.
“Construction is coming up a lot—it seems like the country is also developing,” Sung Bonna said. He predicted that property values across Phnom Penh will rise an average of 30 percent to 50 percent over the next five years.
However, he added: “In Cambodia we can’t predict like that…the situation always changes quickly.”
Many investors are keeping their property development projects here relatively small as they assess the business environment, he said.
One diplomat attributed the upward trend in land prices to Cambodia joining the World Trade Organization and Asean, and building a better reputation for stability.
Saroeun Soush, managing director of Asia Real Property Co Ltd, said the increase was also caused by a demand for housing, as people move from the provinces to the city. Land on Norodom Boulevard, one of the most expensive areas, has increased in price from about $500 per square meters five years ago to $800 to $1,000 per square meter today, he said.
The top foreign property investors in Phnom Penh are Chinese, followed by South Koreans, he said.
Some voiced skepticism about the new developments. Buildings may be a form of alternative investment that will not necessarily be used, said Bretton Sciaroni, president of the International Business Club.
They “are not necessarily a good sign,” unless they are occupied by businesses, he said.
Most property in Phnom Penh is controlled by political parties and powerful families, so if property values decline, the general public is unlikely to be directly affected, Smyth said.
“Most of the land has been consolidated,” Smyth said. “The poor end of the [Phnom Penh] market never had the property anyway.”
One economist said the majority of the land being bought is not being developed.
“The majority of people don’t trust banks, and they can’t put a million dollars under the mattress, so they’d rather put it in land,” the economist said, speaking on condition of anonymity. “They fence it off…. In terms of economic contribution, it’s nothing.”
High land prices will drive the poor out of the city, into remote areas with few economic opportunities, where their poverty will likely worsen, the economist said.