Chinese investors are looking for investments to get their money out of China. The Cambodian property market is proving to be an alluring destination.
By Oliver Ward
There is a new sign opposite the Cambodian National Assembly in the centre of Phnom Penh. A glossy image depicts luxury condominiums, some are as large as 175 square metres. But what is interesting about this sign is not the pictures but the text. It is written in both Chinese and Khmer.
Chinese investors are flocking to buy Cambodian real estate
Wind the clocks back two years. Chinese investors were hesitant to invest in Cambodian property in 2015. The mortgage system within the country was not fully developed. It deterred potential investors.
Now, Chinese buyers are snapping up property across the country. Construction companies are hurrying to construct high-end residential developments to meet demand. There are multiple projects under construction in Phenom Penh. Prince Central Plaza will have 37 floors and more than 1,000 residential units when it is completed in May. Prince Modern Plaza, Diamond 1, and the Bridge will offer similar investment opportunities.
Sales agent Chen Jingjing is responsible for selling units in Prince Central Plaza. She said, “in terms of purchasing, it’s basically all Chinese.” She claimed most buyers are from Shanghai, Shenzhen, and Fujian and Zhejiang provinces.
The same pattern is occurring in other Cambodian cities. In Sihanoukville, 65% of the casinos, condominiums, and hotels are Chinese owned.
Why the shift in buying attitudes?
New luxury condominiums have a projected annual investment return of 12%. They deliver strong returns. But this is not the main reason wealthy Chinese investors are handing over their cash.
Cambodia has become a paradise for money laundering. China’s debt continues to spiral. Many Chinese businessmen are rushing to take their money out of China and invest it abroad. Cambodia represents a great opportunity for them.
It is still a cash economy, with most transactions conducted in US dollars. Chen Jingjing described how more than half of Chinese buyers pay in cash. This, coupled with relaxed banking regulations, makes the country ideal for laundering money.
Another reason is that the Chinese government is investing heavily in Cambodia. The One Belt One Road initiative has brought more than US$7 billion in investment into Cambodia. Construction for a new highway between Sihanoukville and Phnom Penh is underway.
Chen Li is the sales manager at the Blue Bay development in Sihanoukville. She believes this is a key reason for the increase in residential developments in the region.
What will the effect be on the Cambodian property market?
The influx of Chinese buyers will drive the growth of the Kingdom’s property market in 2018. In 2017, 3,488 new high-end residential units entered the market in Phnom Penh. This figure could be as high as 15,688 in 2018.
Land prices have increased in recent years. In Sihanoukville, the price per square metre increased from US$700 to US$1,100. Buyers have more negotiating power as demand increases.
As land prices increase, the local population face exclusion from the market. There are signs of a price peak. European investment in the property market is down. Uncertainty caused by the upcoming general election may limit any 2018 price increases.
The sign opposite the National Assembly belongs to Prince’s Real Estate. The two languages prominently give details on the condominiums’ available and finance options. But the intended advertising targets do not speak Khmer. They speak Mandarin. When they look at the pictures of luxury condominiums, they see a washing machine.