Industry insiders agree that 2023 has been one of the most challenging years for the local property market in the nation’s recent history, with a slowdown in the construction of new properties across all sectors along with a downturn in overall transactions.
2023 in review
Between 2019 and today, the overall supply of new projects in Cambodia doubled or even tripled, said Lawrence Lennon, managing director at CBRE Cambodia, to the Khmer Times.
“And this huge increase in stock in such a short time frame, compounded with a swift slowdown caused by the pandemic, explains the current oversupply being seen across office, condo and borey segments throughout 2023.”
The oversupply has also led to a downward price trend, across segments, he said, as much as 30 percent in some cases.
Rithy Teng, Founder and Chairman of the R Investment Group Cambodia, told Khmer Times, that he agrees with Lennon that the current oversupply of new units in the Phnom Penh market has put downward pressure on landed property prices in Phnom Penh.
In terms of finance for buyers, Teng said that higher interest rates this year generally have also made it more expensive for homebuyers to borrow money which has further reduced demand.
Speaking on the underlying causes of this year’s real estate slowdown, Lennon said, “If we want to consider the health of the real estate sector, we need to also understand the changes to the economy at large.”
“Cambodia is much more globalised than generally understood, and the real estate downturn is connected to a larger global downturn,” said Lennon.
“Firstly, Cambodia has experienced around 51 percent of all Foreign Direct Investment (FDI) from China in recent years. This year the Chinese economy is facing some of its headwinds and challenges limiting this share, which naturally have had a knock-on effect on their surplus of capital for overseas investment destinations such as Cambodia.”
“On the flipside, exports have also dropped this year, especially in the garments sector, a pillar of growth in Cambodia for over a decade,” he explained.
“Europe, UK and the US buy 65 percent of Cambodia’s exports, and 40 percent of that is garments and footwear. This year the garment sector has reduced capacity by at least 20 percent, on the back of reduced demand from key importers,” he added.
2024, a buyer’s market?
Meanwhile, for buyers now and into 2024, it is a ‘buyers’ market.’ Developers facing oversupply and a lack of purchasing power will have to adapt and explore alternatives to maintain value propositions, said Lennon, which couldn’t be better for local consumers.
“We are entering a period where the quality of property management and improved features within developments’ will make all the difference,” said Lennon.
Borey projects are also pushing toward the edges of city, allowing better pricing and more space for developing green and livable areas. “Such a market should breed innovation and competition, as developers compete for a more limited market,” said Lennon.
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