Behind the rows of rectangular bunker-style homes of the sprawling Happiness City housing estate, a handful of young Cambodian architects and engineers huddled round a table in a small thatched hut on Monday afternoon. With a miniature model of the housing complex behind them-complete with roads and a Soriya-style shopping mall-they passed color maps of Happiness City to one another, and charted out designs of the luxury villas the complex will hold.
In Phnom Penh’s emerging building boom, Happiness City, in Russei Keo district, is a success story. “Mostly high-ranking officials working with the government will live here,” marketing official Sokun Monika said, adding that villas sell for up to $170,000.
Well before its scheduled 2007 opening, it has sold almost all its 300 villas and apartments, Sokun Monika added.
But as feverish construction of apartments and villas continues across Phnom Penh, many are wondering: Who can afford to live in them, and where is the money for their construction coming from?
While a small group of government officials, businessmen and foreign NGO staff may have the money to move into the new homes, economists are questioning whether the construction boom is largely aimed at a middle class that may not exist.
Construction should be built upon “the final expectation that there are Cambodians with the financial basis to live in” the new homes, said Kang Chandararot, an economist with the independent Cambodia Institute of Development Study, said Monday.
“Average people are not ready” to do so, he said, adding that after three years, when people realize no one can afford to rent the homes, their prices may well drop.
Real estate agent Bonna Realty Co Ltd receives 30 to 40 new clients every month, usually paying $500 to $1,000 per month for apartments and villas, Sung Bonna, the firm’s director said Tuesday.
The majority of his staff are foreigners working for NGOs or other organizations.
A ground floor apartment in Chamkar Mon district’s Boeng Keng Kang I commune can be bought $40,000, Saroeun Soush, managing director of Asia Real Property Co Ltd said Monday.
Due to the low cost of local labor, a three-story apartment block only costs about $18,000 to build, he said.
About half the investors building new properties are government officials, Sung Bonna said.
“Before people were not confident to invest their money. Most of the money was in overseas banks,” Sung Bonna said. “Now they start to use their money,” due to a perception that Cambodia is politically stable.
But not all the building is completely rational, he said. “Sometimes Cambodian people have money, they don’t know what to do with it, so they try and do something and sell it,” he said.
Some investors are losing money already because of the low quality of their buildings, and the market is likely to reach a glut in the next two years, he added.
Seang Kry, a staff member at No 3 apartment block on Street 360, said that since the block was completed last year, it has only managed to fill five of its 18 apartments, which cost $600 to $800 per month each.
The boom in the capital may be an indication that corrupt government officials are trying to convert their money into tangible assets for when the anti-corruption law is passed and they are asked to disclose their wealth, one economist said Monday on condition of anonymity.
“They’re trying to make their money legitimate,” he said, noting that the building has revealed wealth supplies that many people were unaware existed.
“Before [officials] didn’t dare put money in banks because it would arouse suspicion, so they kept it in sacks in their houses,” the economist said.
Some investors are building to speculate on the land, and are not expecting the homes to be filled, the economist added.
Some business experts say the boom suggests the economy is doing better than organizations like the World Bank have recently estimated.
“The contradiction to the gloom and doom is the growth in housing,” Tim Smyth, Indochina Research managing director said Tuesday.
He added that many of the homes in the suburbs are being built by families involved in small businesses, rather than by tycoons or wealthy officials.
The construction “is probably an accumulation of the last two to three years where small businesses and families have been able to accumulate funds,” he said.
It may also indicate “that perhaps there is a growing middle class looking for this kind of accommodation,” Bretton Sciaroni, president of the International Business Club said.
“These are hard hitting businessmen…so they must think there is a market out there,” he added.
But some charge a number of the hastily built homes are sub-standard.
“There are no codes for building standards. No escape routes, no fire alarms,” one development expert said on condition of anonymity Monday, adding that the apartments are often “aesthetically strange,” and may not appeal to the foreigners they are aimed at.
Some engineers designing the buildings do not have university training, but are able to find work if they have practical experience, Saroeun Soush said.
All buildings larger than 50 square meters need permits from the municipality, Eric Huybrechts, a French government urban planning specialist and adviser to Phnom Penh Governor Kep Chuktema said Tuesday.
Engineers from the municipality check details including the quality of cement being used, he added.
“There are a lot of criteria defined in the law that are applied” to ensure construction quality, he said.
“There’s a lot of people with very poor living conditions and they need houses,” he said, adding that as middle class Cambodians move into the new homes, their old accommodation will become available to the poor.
But the poor are ultimately paying a price for Phnom Penh’s development, the development expert said.
Some people are being evicted from their homes and relocated outside the city, to areas with few economic opportunities, in order to make way for the new buildings, he said.
“Investment in construction should be made to solve housing problems for Cambodians. It’s not being made,” he said. “They’re being built for expats and consultants to stay. There’s no real housing for the poor.”
As the sun went down on Happiness City Monday evening, laborer Len Oeun squatted on a plank and applied concrete to the wall of a new apartment.
He said he had little idea where the money for Happiness City is coming from, and added that he did not believe he will ever be able to afford this sort of accommodation. But he added that he was pleased just to have a job.
“When we’ve got a job to do, we can make money, save money,” and buy a better house, he said.
