What Makes Cambodia Real Estate Popular to Chinese?
The flourishing economy of Cambodia has led to an increasing need for accommodation. This has lead rental to yield eight to ten percent and fifteen percent asset appreciation a year. This makes the nation’s property a perfect investment for Chinese investors who are in search of possible assets internationally.
Impressive Domestic Product Growth and Low-Cost Labor
Aside from the booming industry of Cambodia real estate, the Chinese are also impressed with their growth in domestic product and exports last year. This has prompted the Chinese to invest more in the country, particularly in the infrastructure projects, as well as relocating factories from the mainland to take advantage of the low-cost labor and high tariffs that Washington imposed due to the ongoing trade war between US and China.
Due to the increasing Chinese investors interested to buy properties overseas, Cambodia’s ranking has jumped from 17th in 2018 to 12th place this year.
According to the World Bank, around 2 million Chinese visited the country in 2018, which represents the biggest overseas group, or approximately 32.6%, most of them are from the business sector.
Increasing Demand for Real Property
The main reason for the increasing number of foreign investors in the property sector is because of the consistent high GDP growth and tax benefits. They were expecting high-yield returns on their real estate investment. In the first four months of 2019, Cambodia approved around $2.7 billion worth of real estate products. A 67.3% increase compared in the previous years.
Mainland investor’s inquiries on real estate have increased significantly in the first five months this year. The majority of them prefer to put their money in small condominiums, and others have a budget of less than US$73,000. This investment was perfect, as Cambodia’s demographic is young. At the age of 25, most of them need to rent, and renting in the capital city of Cambodia is quite expensive.
The capital cost of a mid-sized condo in Cambodia is around US$110,000. Still, you will be able to yield around 8% annually, which is favorable for Chinese investors that only generate less than 2% in Shanghai and Beijing.
In spite of the increasing appeal of Cambodia’s real estate industry with international investors, experts are concerned about an oversupply, particularly in the mid to high-end market. New high-end condos are estimated to go up by 243% this year. Next to it is the affordable and mid-range industry.
Experts foresee that the market will become more competitive in the coming years. There will be a decrease in high-end condo prices because of the lowering demand from international investors. The focus will be on the mid-range and affordable condos and property in Cambodia.
Oversupply of high-end developments may not be prevented after the success of some Phnom Penh projects. Experts foresee a continued supply of properties in the real estate market supported by domestic credit and external funding. However, if the foreign demand, as well as the local economy, declines, it would cause an oversupply.