Condo Oversupply in Phnom Penh? Alex Evengroen on Realestate.com.khTV
Feb. 16, 2017, 12:30 p.m.
With the continuous growth of the Cambodian economy, Phnom Penh real estate professionals have witnessed immense change over the last 15 years. One of the most visible changes that has occurred in the last 10 years is the advent of the condominium. This was naturally spurred by the 2010 law allowing foreign co-ownership of these types of buildings. As a city without a skyline just 5-10 years ago, a bird's eye view of Phnom Penh now shows a huge supply of high rise condo blocks - the scale of which is increasing with every new project. This is also probably the same reason why many professionals in the property industry are asking if the condominium market’s gone beyond its actual reach in terms of market absorption and hit a condo oversupply. Is There a Condo Oversupply in Phnom Penh? When asked about it in a recent interview, Alex Evengroen – CEO of Key Real Estate and chief adviser to the CVEA – states that “trends are always moving.” And while a condo oversupply is certainly possible today, it still won’t cause any harm towards the market for the future. In fact, there’s an estimated 11,000 more condominium units expected to be available after completion in the next 18 months. This number will continue to grow in the next few years. Evengroen goes so far as to say that there may actually even be an under supply in condominium properties in Phnom Penh. He explains that Cambodia is a young country and will have lots of people from the newer generation that will plan on getting married soon. This will instigate a baby boomer generation in the not so distant future. This will cause steady growth in the population which is expected to rise from the current 15.8 million to a little less than 18 million by 2025. This is according to the “World Population Prospects: The 2015 Revision” report released by the United Nations, Department of Economic and Social Affairs, Population Division. Naturally, the capital city of Phnom Penh will absorb a lot of this additional population, given it offers the highest salaries and education/career opportunities, suggests Evengroen. Do Cambodian’s prefer landed homes though? When asked about the mindset that Cambodians are more interested in landed properties like boreys and shophouses, as opposed to condos, Evengroen points out that the younger generation of property investors are more modern and open minded because of their exposure to similar concepts through international media. They are now more concerned about their convenience and accessibility of amenities. This becomes something they present to their families who provide them the hard titles from family properties to use as collateral for bank financing for their new condo home. Why might the condo market slow down? Evengroen points out that the sales in the condominium market will start slowing down in the future, but this won’t be because of a condo oversupply. He says that the market will meet its natural end after it has exhausted its free land within the city to construct new condominiums on. In addition to lack of land resources, traffic will become unbearable due to the expected increase in population in Phnom Penh. This will cause investors and developers to look for land on the outskirts of Phnom Penh and in the provinces. But Evengroen says that this isn’t necessarily a bad thing. It’s actually a great opportunity because land prices outside Phnom Penh are comparatively lower and more people will be able to afford properties here. He closes by saying that these are the projections in the market as of the moment and “of course, you will see shifts” in the market. It’s better to have a contingency plan for every possible problem than over-anticipate one outcome and be left unprepared for the other.