Grant Fitzgerald – Country Manager for Independent Property Services Cambodia – in his interview with Realestate.com.kh, weighs in on the issues surrounding Cambodian real estate.
Is There a Looming Oversupply in The Condominium Market in Cambodia?
Fitzgerald concurs that the figures released by the media represent a close comparison to projections by market studies. Around 37,000 units will be released in the market by 2020.
He mentions that “oversupply of condominiums is definitely a concern, one that has been talked about more and more.” But he also states that in any case, with a good amount of research there is a potential for great return for foreign investors. He explains that much like their company does, developers should focus on rentable units.
Fitzgerald says, “If we cannot rent it, we cannot recommend it.”
Fitzgerald qualifies that rentability really comes down to location, design, quality, and a number of other factors. He warns that those that are in the outer areas of Phnom Penh are generally not recommended. Meanwhile, areas like BKK1 and Tonle Bassac have good developments and are easily rented out.
Is There Going to be Another Real Estate Crash, Like in 2008?
When asked about a potential credit crisis caused by the reported current excessive credit growth in the Cambodian property industry, Fitzgerald validated the concern.
He says, “The vast majority of mortgages here use property as collateral. So, I can see how this issue has been raised.” But he was quick to clarify that this isn’t enough to cause a crash. Bank policies remain strict as to what properties are accepted and require around 150 to 200 percent collateral on mortgages.
Fitzgerald explains, “There is quite a bit of margin for error. But in the event, if there is a significant drop in prices, I don’t necessarily believe that it would have a significant effect to the property market.” He compares Cambodia banks as being more conservative than banks in America during the global financial crisis.
Why Should Foreigners Invest in Cambodia Even with These Threats?
Fitzgerald says that there’s always a risk in any market, but Cambodia has seen many foreign investors flock towards them because of the high returns. He states that in comparison to countries like Korea and Singapore where returns only range from 1 to 2 percent, Cambodia’s rate is much higher - at 6 percent. Combine this data with good research, Fitzgerald says that you have a pretty good investment in your hands.