Mortgage loans in Cambodia continue to surge this year, according to Credit Bureau Cambodia (CBC). The credit body’s consumer report showed that outstanding mortgages hit $3.42 billion at the end of June.
CBC’s data showed that loans have increased by 30 percent from the same time last year. Mortgage loans make up over 47 percent of the total consumer credit in the country, which hit $7.16 billion at the end of June.
Mortgage customers are also growing, albeit at a somewhat slower pace. CBC’s document noted that there were 131,376 mortgages at the end of June. This represents an increase of 19 percent over June of 2018.
So Phonnary, executive vice president at Acleda Bank, said that the 30 percent growth of mortgages is positive for the industry. She claimed that opportunities for homeownership are expanding as incomes rise and the economy develops.
“We are seeing more growth in the mortgage industry. But, at the same time, we are always careful about development and we mitigate risks by balancing loans across many sectors.”
According to Phonnary, Acleda’s housing loans, home improvement loans, and real estate loans together hit $273 million at the end of June. This sum was held by 7,913 customers at that time.
While loan terms differ from one bank to another, she said that annual interest rates have, on the whole, fallen. Phonnary attributed this to greater competition in the marketplace.
Cambodia upgrading to more comfortable lifestyle
Nuon Rithy, chairman and CEO of Khmer Appraisal Foundation (KFA), said that there has been good cooperation between the financial and real estate sectors in Cambodia. The two industries, he said are growing rapidly in parallel.
Rithy reflected on the changing demographics of the country, adding that more people are entering adulthood and wanting to live more independently than their parents did.
“Before, when people had lower incomes, the biggest concern was having enough food to eat … Now people have higher incomes and they want to upgrade to a more comfortable lifestyle.”
Even those who could already afford to own a home are now upgrading to larger homes, or homes in better locations, he said.
Officials concerned over high-interest mortgages
One caveat to the CBC’s report, however, is that it only accounts for mortgages taken through financial institutions. It is very common in the Kingdom to enter into a payment plan with the home’s developer. This is particularly popular for boreys, the landed homes that are usually built in large subdivisions.
The popularity of developer-issued mortgages has exploded in the Kingdom over the last few years. Typically, these are 25-year contracts and rarely require down payments.
Though these mortgages initially appear attractive to buyers, interest rates can often double or triple the sticker price of a home.
Meanwhile, Cambodia’s banks usually require down payments of at least 30 percent and involve lengthy checks on credit history and repayment ability. Interest rates for these mortgages clock in at around seven to 12 percent.
Late last month, an official from Cambodia’s central bank expressed worry over high-interest loans in the Kingdom, warning buyers to carefully consider a mortgages rate before signing.
To learn more about Cambodia's changing demographics, read the demographics section of our Investment Guide 2019.