ASEAN HEADLINE | Property: Five Things To Consider Before Buying Property in Cambodia

It is fair to say that the Cambodian property market continues to see a correction in mid-2024 and that the buyer profiles for condos and other properties on the market have changed over recent years.

There is still a healthy interest from overseas but regionally there are deals to be had and buyers and investors are paying close attention to geo-political tensions, interest rate cuts, and in the most election-saturated year in the record books, any potential shifts in markets.

Condos do remain of course the most popular property asset for international buyers in Cambodia due to the supply and legality for foreign owners, but the legal Trusts and commercial property opportunities have raised interest too.

So what are some of the key things to consider before putting physical or digital pen to paper for buying such a property in the Kingdom?

Are The Cambodia Property Buyer Profiles Changing?
With the context that there are more Cambodian buyers in the market for a variety of reasons, including better-targeted marketing and builds catering to local tastes, it goes without saying that Cambodians have the right to buy any property in the Kingdom if they have the finances.

In 2022, foreign condo property sales accounted for 65% of all condo sales according to realestate.com.kh – and one & two-bedroom condos were most in demand.

There are also more loan and property mortgage options available to Cambodian passport holders but this will more than likely require collateral such as land. The options for non-Cambodians are far more limited, if available at all.

There are still many desirable condos being developed, in Phnom Penh in particular, and the condo supply is expected to increase significantly by 2025, with mid-tier developments dominating the future supply – so definitely do your research.

The condo supply was projected to reach nearly 80,000 units by 2025 in the capital. Mid-tier condo developments will dominate the supply as property developers target Cambodia’s emerging middle class as well as expatriates residing in the Kingdom and foreigners buying from abroad.

The ambitions of the government should see Cambodia graduate from the Least Developed Country (LDC) status in 2029, and according to the World Bank Country Lending Group guidelines, the lower-middle-income economies have a per capita income between $1,086 and $4,255 and the upper-middle-income economies between $4,256 and $13,205, while high-income economies have a per capita income of $13,206 or more.

Cambodian Property Titles and Ownership

The preferred property title in Cambodia is a Hard Title, which is recognised nationally and provides detailed information about the property and with condos should be a standard feature when being purchased.

There have been efforts to digitise titles and claims due to the number of disputes when it comes to land in particular.

Land and property ownership can be complex for foreign-owned businesses and foreigners in Cambodia to understand – however, foreigners can buy and own property in Cambodia and legally own condos in Cambodia.

.

For foreigners, as we have regularly reported, restrictions mean they cannot own land outright in Cambodia, but they can own properties such as condominiums under a Strata Title, provided at least 30% of the other properties in the building are owned by Cambodians.

A Condominium Certificate of Title (CTC) will be registered under the foreigner’s name too.

Broadening Out From Condos – Commercial Property Opportunities In Cambodia
At the JCI ASPAC Angkor 2024 panel discussion, Neak Oknha Sear Rithy, Chairman of WorldBridge Group, mentioned that in the property sector, there are major opportunities available for local and foreign investors, such as commercial property like logistics infrastructure, as well as tourism properties, agricultural properties and other infrastructure properties.

Rithy said that the price of land per sqm is as much as USD $10-12,000 in Vietnam in the CBD but it’s more likely to be USD $5,000 in Cambodia. For Industrial or commercial spaces he estimated prices to be approximately USD $100 or less while in neighbouring countries this figure will be around USD $200-300 per sqm.

For warehouses and factories in Cambodia, lease terms typically range from 5-10 years, accommodating long-term industrial activities, but shorter agreements can be arranged to meet specific requirements.

The main types of commercial real estate in Cambodia are:

• Office buildings

• Retail real estate

• Industrial, factories and warehouses

• Hotels & guesthouses/lodges

• Commercial land

 

Cautionary Tales – Buy From Trusted Property Developers In Cambodia
The messaging for some time in terms of buying condos in the local Cambodian market, and in particular in the post-pandemic era, is to buy from trusted developers who have a proven track record of delivering quality and on time.

In 2024, several residential housing projects in Phnom Penh and Siem Reap came under scrutiny from government authorities due to potential illegitimate developments.

Buyers were warned to conduct due diligence before committing to property purchase agreements, and the Real Estate Business & Pawnshop Regulator, which operates under the Non-Bank Financial Service Authority (FSA) of the Ministry of Economy and Finance (MEF), issued warnings to two Phnom Penh based real estate development companies for operating without proper licenses.

If there are any doubts, buyers and investors can contact the Real Estate Business & Pawnshop Regulator to check the legality of developers and that the correct real estate development business licensing requirements have been met

The below is a guide if there are any doubts:

• Choose a Trusted developer with a record of previous projects

• Check the sales license

• Check the construction license

It is a positive sign of the market that the regulator is enforcing compliance which it says upholds the integrity of national real estate development regulations, and protects consumers from illegitimate investments.

It is still, as in markets around the globe, the buyer’s responsibility to carry out their diligence and vigilance before investing in new property developments.

Cambodian Cities Continues To Grow

Many Cambodian-based property developers target local and foreign buyers and investors and offer some sort of rental return scheme or Guaranteed Rental Returns (GRR).

This is future rental income that is guaranteed by the developer or management company to the property purchaser for a contracted period of time after the purchase agreement is signed and the ranges can vary as can the duration (for example 2-5 years).

According to the World Bank, Cambodia’s urban population is expected to reach 44 per cent by 2030 and this is compared to 25 per cent from 2020. Urban population growth of 3.07 per cent is expected in 2024 (over 4,5 million people), with a 3.29 per cent annual growth rate for the past 10 years. www.realestate.com.kh

.