The real estate sector in Phnom Penh is experiencing a minor revival, though at prices significantly lower than they were during the 2008 property boom, real estate agents said yesterday.
People are again buying property but unlike the unchecked speculation of last year, buyers are only fulfilling commercial or personal needs, realtors said.
Sung Bonna, president of Bonna Realty, said that while properties are still hard to sell on the outskirts of Phnom Penh, real estate around Norodom Boulevard and other central locations is again in demand but at far lower prices than in recent years.
“People started buying in the last quarter, and this quarter, this month people are starting to buy but they are buying at the real bottom price,” Mr Bonna said.
Property prices in Phnom Penh increased in some cases by as much 1,000 percent from 2005 to July 2008 – when the market crashed – with the most expensive land on the capital’s riverfront rising to about $5,000 per square meter, a more than 900 percent increase from $550 per square meter in 2005, according to statistics from Bonna Realty.
Now riverfront property is fetching about $2,500 per square meter, while property along Russian Boulevard has dropped by more than 50 percent since July 2008 to $1,250 per square meter currently, according to the firm.
“It is a little bit of good news but it is bad news for the seller, they want to sell but there market is at the bottom price,” Mr Bonna said.
“More people…understand that they cannot wait any more. People need cash, they cannot hold the property anymore. The [property] hunters know that this is the case,” he said, but added that the number of transactions will have to increase substantially before the trend points to a recovery in the property market.
Sear Chai Lin, director Visal Realty, said yesterday that there are signs that people who had held onto their property investments are now being forced to sell in order to pay back outstanding loans. Buyers, however, are being selective, and are only going after properties in prime locations, and with a specific purpose in mind.
“They are looking to buy it for the use, for a purpose, for their office, something like that,” he said.
There was disagreement, however, as to the significance or extent of the renewed property transactions.
John Brinsden, vice chairman of Acleda Bank, said his bank has begun issuing more mortgage loans for residential property in the last quarter.
“We have been reviving that, that business had all but dried up,” he said. “We feel that the economy is settling down. We have seen the worst of it.”
Still, he said, there is little movement on major real estate projects.
“There still aren’t very many transaction taking place,” he said. “It’s still a narrow segment of the real estate market. There are not enough transactions to establish a base line price,” he added.
Stephen Higgins, CEO of ANZ Royal Bank, said that his bank has seen an increase in deposits from real estate transactions over the last two to three months signaling the very beginning of recovery.
“Twelve months before that such transactions were almost nonexistent,” he said, “There are some people out there who have to sell, while people with cash are being a little bit more optimistic about the outlook.”
Speculative property buying, which was responsible for last year’s spectacular boom and bust in the market, was responsible for most non-performing loans at ANZ Royal and other banks, said Mr Higgins.
“I think the banking sector will emerge with more strict credit criteria and that will be a good thing,” he said.
Dieter Billmeier, a vice president at Canadia Bank said he has noticed a slight increase in mortgage applications this month, but he doesn’t expect the beginning of a real recovery until next year.
“There is activity, but only on a slow basis. I would not be over enthusiastic about it.” he said. “It’s not significant.”
David Coleman, a property advisor for Cambodia Angkor Real Estate in Siem Reap, said he has watched at least five real estate companies in Siem Reap town go out of business this year and that his company still hasn’t made any sales recently.
“It may be too little too late. It’s be a horrible year for real estate this year. We are getting online inquiries in greater number than six months ago,” he said, adding, “It’s a matter of converting inquires to transactions.”
The draft law on foreign ownership of condominiums currently under consideration at the Council of Ministers will hopefully result in an increase in sales, Mr Coleman said.
“We are hopeful. The new law is a step in the right direction for sure and we are happy the government has gone down that route,” he said.