While the property market in Phnom Penh remains robust, the country’s oft-overlooked coast is carving out its own reputation
In Cambodia, all roads have traditionally led to Phnom Penh – at least from a real estate speculation perspective. The charismatic capital is the country’s hub of commerce, by far its most liveable city in terms of amenities and has its best lifestyle options. To cap it off, improved connectivity to major Asian destinations such as Singapore, Hong Kong and China from Phnom Penh’s international airport has further cemented the city’s status as the nation’s investment epicentre.
With a variety of large-scale, quality condominium and serviced apartment developments redefining the city’s skyline, Phnom Penh will continue to be Cambodia’s property lynchpin. Significant movement in other regions, however, is now spreading the action more evenly.
Unsurprisingly, given its prized combination of azure ocean, spotless white-sand beaches and lush tropical scenery, many experts tip the south of Cambodia as the country’s next investment magnet. Long established as a haven for backpackers and well known to long-term Asia residents, the city of Sihanoukville, in particular, is broadening its appeal with luxury condominiums and sumptuous island retreats gaining primacy over the infamous dive bars and beach bungalows.
There are now scheduled flights between Sihanoukville and Phnom Penh and Siem Reap, cutting journey times from the capital and the country’s main tourist town. Silk Air was due to launch its first direct flight from Singapore to Sihanoukville in December 2015. And with other airlines looking likely to follow suit, the scene is set for the rise of a formidable contender in Southeast Asia’s resort property sector.
“We feel that Cambodian resort property is extremely well-placed to enjoy an uplift in capital values akin to that of Phuket and Koh Samui in the 1990s,” says Chris Hobden of CBRE Cambodia.
Song Saa, Cambodia’s first luxury island resort development, has earned numerous international accolades since opening in 2012. The resort currently has a number of resale opportunities available, including one of the project’s flagship residences, Villa 1, a two-bedroom, over-water villa, which featured as “Property of the Day” in the Wall Street Journal in 2014. Song Saa was also awarded Best Villa Development (South East Asia) at the coveted South East Asia Property Awards only months after opening its doors in 2011.
Building on the success of Song Saa, Alila Villas Koh Russey – located on a small island around four kilometres offshore from Sihanoukville – is now under construction, with the show villa due for completion in January 2016 and the five-star Alila Hotel by Q2 2016. The project offers one-bedroom villas with a guaranteed yield of 6 percent for a five-year period, in addition to two- and four-bedroom villas, both with the option of opting into the resort’s managed income scheme or available as “free villas,” affording unrestricted use all-year round.
“With Thai resort property having enjoyed multiple rises in value over the past 20 years, Cambodia’s resort market is widely considered by experts to mirror that of Samui’s in the mid-1990s,” adds James Padden of CBRE Cambodia. “Its natural appeal, warmth of hospitality and unspoiled islands offer a fresh and more eco-conscious approach to resorts.”
Sihanoukville’s dynamism is reflected in areas outwith the resort residence segment. The city has the only deep-sea port in Cambodia and its Special Economic Zone has achieved a healthy take-up of land from predominantly Chinese companies setting up operation in the Kingdom. Other drivers for inward investment include an increase in land transactions and new casino licenses being granted.
With economic possibilities opening up, the city of Sihanoukville has seen a mini-boom in condominium development with D’Seaview and Sunshine Bay among the major projects launched in 2015.
“There are real opportunities within the industrial sector,” says Ross Wheble of Knight Frank Cambodia. “We predict that these will ultimately benefit other parts of the Sihanoukville real estate market.”
While the property market in Sihanoukville is heating up nicely, things are quieter in Cambodia’s other secondary cities. Siem Reap, the gateway to the temples of Angkor, has little to note in terms of residential projects. However, its healthy tourism sector continues to diversify.
New additions in this area include Cambodia’s first downtown duty free store, Angkor Duty Free and T Galleria, which is currently being developed by Hong Kong-owned DFS Group and will target the luxury retail segment. With the expansion of the international airport, which this year welcomed a new arrivals terminal and departure area for check-in, immigration and boarding, experts believe the medium- to long-term outlook for the hospitality sector is positive.
Despite the emergence of the south coast as an exciting market for investors, Phnom Penh remains by far the biggest show in town. The upsurge in high quality developments in areas such as Boeung Keng Kang, one of the city’s wealthiest enclaves, continues to pique the interest of investors from Asian markets such as Singapore Hong Kong, Taiwan and top-tier Chinese cities. Foreign ownership rules are relaxed and with Cambodia continuing to develop at a rapid pace – annual GDP growth is currently about 7 percent – the Cambodian capital looks like a solid long-term bet.
While other markets in the region suffered a rather flat 2015, Phnom Penh performed relatively well – without producing much in the way of fireworks. Prices of existing stock have remained stable, achieving growth rates of up to 5 percent per annum over the past two years, as have gross rental yields and rates with the completion of new condominiums and serviced apartments keeping pace with demand. The average selling price of international-standard condominiums has, however, risen from approximately USD2,500 to USD4,000 per square metre in prime locations since 2013.
“There is still significant demand from both foreign and local investors and developments continue to achieve healthy sales rates,” adds Wheble. “It will not be until the completion of these projects that we start to see a clearer picture in terms of domestic demand for leasing and secondary sales.”
Despite an overall rosy picture, there are potential headwinds that could adversely impact Cambodia’s strong growth. These include the appreciation of the US dollar, to which the Cambodian riel is pegged, making Cambodia more expensive for inbound investment. The country’s political scene too, while seemingly settled currently, has potential for volatility with a general election mooted for 2018 and opposition forces determined to loosen Prime Minister Hun Sen’s tenacious grip on power.
Nevertheless, with its real estate market extending its reach from city to beach, the opening of a new property front looks likely to entice a new wave of investors.