In another indication of Phnom Penh’s oversaturated real estate market, a report released on Tuesday says that a third of individual houses in gated communities launched for sale last year have yet to sell, in addition to tens of thousands of units still in various stages of completion soon to hit the market.
The report by VTrust Appraisal, a property valuation firm, says that about 33,500 completed units remain unoccupied, while another 28,000 houses are due to be completed by the end of the year.
“There have been strong signs over the past few years that the housing market, especially in Phnom Penh, is in oversupply,” said Miguel Chanco, the lead analyst of Asean’s Economic Intelligence Unit, commenting on the report on Tuesday.
An industry report released earlier this month warns that Phnom Penh is set to be flooded with condominiums. U.S.-based real estate services company CBRE Group’s Cambodia affiliate said the total condominium supply was set to quadruple in just two years.
Tuesday’s new report shows that the construction of so-called cluster landed houses—gated communities of separate, individual living units—is also energetically underway in an uncertain market.
“By the end of 2016, supply of cluster landed housing had cumulatively reached 100,278 units in total, 69 percent of which were finished, and 67 percent were sold,” the report says.
The oversupply could lead to developers offering flexible payment schemes, lowering prices or putting construction on hold, it adds.
Meanwhile, figures from the Land Management, Urban Planning and Construction Ministry show that despite a sluggish market, more and more construction projects—from skyscrapers to condos—are being given a green light in the city. About $8.5 billion dollars in construction projects was approved last year—more than twice the amount approved the year before.
Hoem Seiha, director of research at VTrust and author of the report, said that the oversupply of landed houses was not as concerning as the excess of condos.
“As we see from the market demand, these landed houses should be able to be filled eventually in the next two to three years, but at a slower pace compared to the past, given the high number of units supplied at the same time,” he said.
Mr. Chanco agreed.
“Phnom Penh’s population may be small compared to other capital cities in Asean, but salaries are rising rapidly,” he said.
“I wouldn’t underestimate the long-run potential of Cambodia’s overall middle-class.”