Soft Sales Fail to Dent Phnom Penh's Condominium Boom

Softer sales in the Phnom Penh condominium market are failing to deter the development boom the city is experiencing, with 13,730 new units released into the market in ‘off-plan’ proposals alone in the first half of 2016. A 52 per cent year-on-year increase on the same period in 2015 with the rate of supply causing some to speculate the city will soon face a glut of condominiums.

The warning is raised in a report released by global real estate agent Century 21 (Cambodia), Phnom Penh’s Condominium Market Report H1 2016, which highlights that there are now 110 Phnom Penh condominium projects with a total of 36,742 units in the city. Of this 24 projects with 5,014 units have so far been completed and delivered to buyers. By the end of this year an additional 3,620 units are expected to become available.

The risk of oversupply in the Phnom Penh condominium market is supported by the world’s largest commercial real estate services firm, CBRE Group, whose independent research forecasts Phnom Penh condominium numbers to rise by a staggering 794 per cent, or 19,018 units, within the next two years as a result of sustained Cambodia GDP growth, attractive returns, and rapid urbanisation.

Phnom Penh Awash With New Condo Developments

Once completed The Bridge will comprise 45-storeys and be the tallest high-rise condominium development in Phnom Penh Photo: John Le Fevre

Among major Phnom Penh condominium projects under development are: Bodaiju Residences, the largest Japanese property development in Phnom Penh comprising 928 units, this is closely followed by D.I. Rivera with 900 units, The Bridge with 762 units, Bali Scenery (522 units), Casa Meridian (414 units), and Diamond One (372 units).

A flick through the webpages of realestate.com.kh, one of the prime sources of real estate news and data in Cambodia, shows there is no shortage of developers who see Phnom Penh as offering similar growth potential as Bangkok did ten years ago, when tower cranes dotted the skyline no matter in which direction one looked. However, while some are seeing a looming glut, there is little if any reduction in prices, despite only 13 per cent of the new units available in the first half of the year finding buyers.

And therein lies the rub. Potential customers for Phnom Penh condominiums are mostly the rich. Even Cambodia’s rapidly emerging middle-income class finds it hard to afford the high price of Phnom Penh condominiums where one-bedroom units of about 50 square meters (538sq.ft) sell for an average of $89,720, while two-bedroom condos of 85 square meters (915sq.ft) sell for an average of $153,000.

In fact, according to the report, some 70 per cent of Phnom Penh condominium buyers are foreigners, with those from China, Japan, and Singapore topping the list.

Enormous Supply, Future Uncertainty

13,730 Phnom Penh condominium units were released into the market in 'off-plan' proposals alone in the first half of 2016 with the market expected to reach 37,570 units by 2020 — 13,730 Phnom Penh condominium units were released into the market in ‘off-plan’ proposals alone in the first half of 2016 with the market expected to reach 37,570 units by 2020 Photo: John Le Fevre

Kuy Vat, chairman and ceo of Century 21 (Cambodia) blames the low transaction-to-stock ratio during the first half of 2016 on the enormous supply outstripping demand. In addition, he said, the decrease in transaction volume was also affected by external economic impacts, in addition to uncertainty over the property market in the following years.”

Sharing this view is Touch Samnang, president of Overseas Cambodia Investment Corporation (OCC), who said investors have traditionally focused on the foreign and upper-class market, but they have now turned towards the average crowd. I don’t care if the number of Phnom Penh condominiums rise to 30,000 or 40,000 units; what I worry about is who the consumers will be.

Bullish on potential market growth in the city, the Phnom Penh’s Condominium Market Report H1 2016 predicts Phnom Penh condominium numbers will reach 37,570 units by 2020, with recently completed and ongoing or new projects expected to reach 148 buildings.

While Phnom Penh condominium project sell-outs usually take 29 months to accomplish compared to 40 months in Thailand and Vietnam, the report warns that this cycle is likely to grow due to declining sales compared to previous years.

Developers are no longer seeing the 15 to 20 per cent growth in purchase activity they enjoyed last year. In fact, the slow-down has been such that two projects scheduled for commencement have been shelved indefinitely, said Century 21’s Mekong ceo, Chrek Soknim.

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