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Developer concerned by real estate oversupply

An under-construction borey in the capital’s Meanchey district.
An under-construction borey in the capital’s Meanchey district. Hong Menea

Developer concerned by real estate oversupply

A prominent local developer has raised concerns about the oversupply of the sector amid regional and global economic uncertainties stemming from geopolitical tensions and the ongoing Russia-Ukraine war.

Leang Meng, group president of local conglomerate Chip Mong Group, said at a business forum by the Cambodia Oknha Association last week that the sector’s slowdown is because many local investors invested in the construction sector, with the view that it was an “easy profit-making” venture.

However, the economic slowdown has affected their cash flow, resulting in an oversupply.

He added that “some people were buying a lot”, seeing it as an opportunity to make “high profit”.

“As a major investor in the real estate sector, I have about six projects that I am working on. Can I still sell them? Of course I can but just a little. The sale of units decreased compared to before but those who bought my units in my projects are for living, not to keep and sell later to make a profit,” Meng said.

He predicted that the sector will not recover soon as it is still facing some challenges and is expected to continue until 2024 but with some improvement likely from October onwards.

“Looking ahead, how do we see real estate investment? For me, I see that next year we would still face a bit of difficulty because now we have previous orders. I hope the new government understands the problem and would have a strategy to help improve the sector,” he shared.

Housing Development Association of Cambodia secretary-general Huy Vanna told The Post recently that the construction industry had grown significantly between 2008 and 2019, as demonstrated by the emergence of substantial numbers of small and large buildings, particularly in Phnom Penh and Sihanoukville.

However, after the government amended some laws relating to online gambling, followed by the arrival of Covid-19, the Cambodian construction sector declined sharply, especially the segment of large foreign-owned buildings, he said, adding that almost all ongoing projects are either apartments or the typically-gated residential developments known locally as “borey”.

“The continuing succession of economic crises that began in end-2019 has left the Cambodian construction sector in a state like never before, with most developments now low-rises owned by local investors,” he said.

The Ukraine conflict, international financial tightening, elevated interest rates, and China’s ongoing real estate woes may have some impact on the stability of Cambodia’s financial system, requiring stakeholders to work together to minimise potential risks to the economy, according to National Bank of Cambodia (NBC) governor Chea Serey.

Chea Serey, in a seminar on July 6 advised careful scrutiny of the Cambodian real estate sector, which she identified as a material source of risk to financial stability, and highlighted a slump in demand for properties following a decade-long growth boom.

“Maintaining financial stability is an inter-sectoral task that requires the cooperation and coordination of the authorities and stakeholders, as the financial system is closely intertwined with … the physical economy,” she emphasised.

According to the data, the Land Ministry issued permits for the construction of 1,463 investment projects from January to May, covering over five million square metres, with total registered capital of $2.3 billion, or up 138.5 per cent on a yearly basis from just over $950 million.

The ministry pointed out that just 41 projects (2.8 per cent) were foreign-owned, notably by Chinese, Japanese and South Korean investors.

However, these ventures made up nearly $600 million (roughly one quarter) of the total registered capital.

There are 2,586 buildings, around five storeys tall in Cambodia, with Phnom Penh housing the most at 1,711 (66.2 per cent), followed by Preah Sihanouk with 690 buildings (26.7 per cent) and Banteay Meanchey - 142 (5.5 per cent).

Similarly, there are 52 buildings nationwide that are at least 40 storeys tall.


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