Cambodia’s property market has developed at an increasingly fast pace over recent years which has provided foreign investors with a range of opportunities. Post Property got some insight from Edward Dou, partner of Tykoon Real Estate, to see what lays ahead for property and foreign investment in 2017.
2015 saw a spike in foreign direct investment (FDI), and the property sector was a big benefactor of these investments both in terms of headline investments in new development projects, and also from foreign individuals investing in one or numerous condos, SoHo units or strata office.
2016 saw the physical manifestation of this wave of development investment in the form of large-scale buildings rising out of the ground across Phnom Penh. However, there was also a slowdown in foreign private individual sales and/or investments.
This led to developers and individual investors to be more cautious in 2016 as everyone took stock of the market.
Nevertheless, a palpable appetite for further development still existed with developers actively seeking out opportunities away from the ubiquitous condo template by innovating on residential design or looking at new sectors and geographies all together.
There was evidence that private individual foreigners were still buying real estate in Cambodia late in 2016 and that private investors were particularly attracted to guaranteed yields, developers with strong reputations and new or innovate products/design. Consequently, FDI in property/real estate remained strong in 2016 but not equal to 2015’s.
Looking ahead for 2017, it is likely FDI will remain high but not in the same sectors or geographies as experienced in 2015 and 2016.
If Phnom Penh is a cup, then that cup is brimming with development. That does not mean there will not be further foreign investment in Phnom Penh in 2017, but expect to see foreign investment move towards entertainment, hotels, condo-hotels and retail in 2017 rather than in 2015 and 2016 where the focus was largely on the residential sector.
For 2017, as a foreign private investor, it is an interesting time.
With greater competition, developers shall increasingly offer better guaranteed yields and deals to foreign (and local) buyers. Against the back-drop of stagnant low interest rates in developed economies, guaranteed yields of five percent and above represent ways to appreciate wealth rather than in real terms losing it as it sits in the bank – but crucially only if the private foreign investors trust the developer and the investment holds its value.
That brings me to another sector and geography that shall +see significant FDI, and that is Sihanoukville. Traditionally, only low-scale, low-rise tourism expect big announcements about mega resorts above 1,000 hectares and significant foreign FDI in this province.
Whether or not all the FDI will be in 2017 is difficult to predict, but it is looking likely the next real estate boom may well be in Sihanoukville. Expect more tourism, hospitality and entertainment investment but also residential investment, and, interestingly, that residential foreign investment may not just be in condos but also on the ground.
The details are not known but there is a possibility Sihanoukville may gain a ‘Special Status’ and this special status may permit foreigners to buy land within specially licensed areas within the province.
Whether this would apply to industrial units such as the Thai Special Economic Zone model or include holiday homes for foreigners is not yet clear, but either or both will lead to significant FDI in the province and be an engine for growth and investment should such a status come to fruition.