Despite claims the Cambodia property market is not healthy enough in 2022 to compete globally, there is evidence this is not the case. The sector has ridden a massive wave of direct foreign investment, mostly from China, with no foreseeable limit, despite COVID-19.
Property market, mortgages and economic growth
With more and more Cambodians emerging from poverty, local demand is also growing. This is further fueled by the sustained growth of the mortgage market. Mortgages and other housing loans were only introduced in Cambodia in 2008 and by 2010 represented about 1% of GDP. By 2020, this had risen to 15%. By 2020, total outstanding mortgages of owner-occupied housing was US$4.22 billion, up 25% from 2019. This rise is attributed to falling interest rates and an increase in loan options. In turn, this maturing of the economy has brought more stability and less speculative activity to the Cambodia property market.
It is not all roses, of course. According to Forbes, Cambodia experienced 7 – 8% economic growth between 2000 and 2019, largely supported by the tourism, garment, construction, real estate and agriculture sectors. These were, of course, hammered during the pandemic, keeping it one of Asia’s poorest economies thwarted by corruption, income inequality and low job prospects. The percentage of Cambodians living in poverty is decreasing, yet more than 50% of the population is less than 25 years old, most of whom lack education and real skills. This, coupled with the World Bank upgrading Cambodia from a low-income to lower middle-income economy in 2016 offers a grave challenge for the government as its eligibility for foreign aid evaporates.
Cambodia has run a high current account deficit above 9% of GDP for many years and a major economic challenge going forth will be in nurturing a climate for the private sector to improve the economy without increasing social inequalities. Further, Cambodia’s economy contracted by 3.5% in 2020 due to Covid. It is expected to remain weak as impact of the global pandemic continues to affect global supply chains.
There is an upside to all this!
Despite some predictions of a property market crash, due to a condo supply glut and lower demand, most industry leaders generally feel that the country is moving in the right direction. The next 5 years’ growth is expected to be mostly in urban areas, specifically in condo and borey developments. Direct and robust foreign investment in Cambodia, rising land prices and a stable political and economic environment supports this.
According to a Phnom Penh Post 21 April 2021 report, condo prices logged an increase between January and March as new projects entered the market. Due to lockdown restrictions, lower regional and global economic growth and resulting lower local property demand, the increases were lower than expected, it said.
The Post goes on optimistically about economic growth as the property market normalizes amidst a global push to vaccinate against Covid-19. Investors appear to be starting to make fresh investment decisions and more Cambodians are purchasing more and more homes to live in.
As recently as June, the WorldBank forecasted Cambodia’s growth at 4.5% in 2022:
“… Cambodia’s real growth is projected to reach 4.5% in 2022 as anticipated impacts from negative terms of trade are caused by rising oil prices and a cyclical slowdown in America and China. Over the medium term, the economy is expected to trend back to potential, growing at around 6%.
In response, the development bank recommended the Cambodian government continues efforts to contain COVID-19 infection, strengthen consumer and investor confidence, promotion of exports and particularly in agricultural commodities as well as facilitate trade and reduce the costs of doing business, and stabilization of retail prices…”.
Putting all these aspects together, it seems that on balance, the Cambodia property market is healthy enough to compete despite its challenges.
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