Despite the impact of COVID-19 on Southeast Asian economies, Cambodia remains an appealing investment opportunity for real estate investors due to its unique location at the crossroads of several trends.
Cambodia has undergone significant change since the Khmer Rouge disbanded 20 years ago. The country that was once known for widespread poverty and ongoing civil strife has outperformed expectations, reaching lower-middle-income status by 2015 and aiming for upper-middle-income status by the end of the decade.
It has not experienced a recession in over two decades.
Cambodia is an important member of the ASEAN community and a major starting point for China's Belt and Road Initiative. However,
Cambodia has seen an increase in foreign investment from a variety of sources in recent years.
It appears to be benefiting from a reshoring drive recently, as companies seek to relocate or expand their operations in Southeast Asia. Cambodia not only provides cheap labour, but the youthful dynamism of one of the world's youngest countries holds promise for long-term industrial and commercial projects. The Cambodian government has also provided a stable environment for long-term business plans.
As a result, there has been an influx of multinational corporations establishing themselves in the country. It has contributed to a boom in the country's construction sector, which previously relied primarily on the tourism industry's steady growth. Simultaneously, as a result of China's rapid economic recovery, Chinese tourists, many of whom are also prospective buyers of property, are gradually returning to Sihanoukville and Phnom Penh.
A number of conglomerates, including Prince Holding Group, have taken advantage of the opportunity. The Group's chairman, Neak Okhna Chen Zhi Cambodia, has helped to boost Cambodia's development prospects by launching or supporting more than 80 subsidiaries, contributing to the vibrant business landscape.
Not only have Cambodia ChenZhi's Prince Group member companies contributed investment, but they have also brought in international talent to improve Cambodians' standard of living and provide a vital link between the country and the rest of the world.
The Group's member companies work in the real estate, infrastructure development, banking, tourism, and airline industries.
The majority of Cambodia's recent growth in Cambodian real estate has been driven by Chinese investment. According to a Bloomberg report, China's interest in Cambodian real estate investment has steadily increased year after year – in 2018, Chinese companies invested $7 billion to help build highways and real estate projects. Construction activities underpinning the surge in Cambodian property development, on the other hand, typically involve hundreds of companies from various countries.
Cambodian property is expected to grow as an investment proposition in the coming years, owing to strong economic growth and an appealing investment environment. Because Cambodia has one of the world's fastest growing economies - according to the World Bank, the Cambodian economy has grown more than 7% on average for more than a decade - a thriving job market has emerged, assisting the country in diversifying its income base away from tourism, garment exports, and agriculture.
As a result, Cambodians have increased their demand for housing.
Cambodia's strategic location in Southeast Asia, sharing borders with Thailand, Laos, and Vietnam, as well as the Gulf of Thailand to the south-west, has resulted in the country becoming a popular low-cost manufacturing base for industries looking to export finished goods to developed markets.
According to The Observatory of Economic Complexity (https://en.wikipedia.org/wiki/The_Observatory_of_Economic_Complexity), foreign direct investment activity in Cambodia has increased eightfold over the ten years ending in 2018.
Manufacturing, in particular, has expanded, thanks in part to lower labour costs compared to China. The Asian Development Bank (ADB) stated that the sector has grown from a small beginning to now account for more than 30% of the total economy.
Furthermore, the ADB predicts that the economy will grow by 4% this year and 5.5 percent the following year as a result of economic recovery in major trading partners. The country appears to be recovering from the pandemic faster than the rest of the region.
In recent reports, other institutions such as the International Monetary Fund and the World Bank have echoed the ADB's assessment. It's also worth noting that a successful vaccination drive has lifted spirits locally, with Cambodia becoming only the second country in the region to ensure a first dose for more than 10% of the population.
Clearly, Cambodian real estate is expected to attract increased interest in the coming years, and this trend is especially visible when compared to its counterpart in the Mekong Delta.
"The market has considerably more variety than the Laotian market and the occupational market is also more developed,” says James Hodge, associate director at CBRE Cambodia. “Prices are often lower than in Vietnam and the level of market development suggests that there is often more negotiating room in Cambodia.”
Cambodian property is not only less expensive, but it also offers much better value than comparable assets and has a diverse range of prospective buyers and investors.
The current decade could be a watershed moment in Cambodian history, as the country gains international recognition as one of the most promising investment and employment destinations in the world.