Despite the devastating effects of COVID-19 on Southeast Asian economies, Cambodia remains a desirable investment destination for real estate investors due to its unique position at the crossroads of several trends.
Cambodia has undergone a significant transformation since the Khmer Rouge disbanded 20 years ago. The country, which was once known for widespread poverty and civil strife, has outperformed expectations, achieving 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 more than two decades.
Cambodia is an important member of the ASEAN community and a key hub for China's Belt and Road Initiative. For several years, however, Cambodia has seen an increase in foreign investment from a variety of sources.
It appears to be benefiting from a reshoring drive recently, as businesses seek to relocate or expand their operations in Southeast Asia. Cambodia not only has cheap labour, but it also has the youthful dynamism of one of the world's youngest countries, which bodes well for long-term industrial and commercial projects. In addition, the Cambodian government has provided a stable environment for long-term business plans.
As a result, a slew of multinational corporations have set up shop in the country. It has aided in the growth of the country's construction sector, which previously relied heavily on the tourism industry's steady growth. Simultaneously, due to China's rapid economic recovery, Chinese tourists, many of whom are also potential property buyers, are slowly returning to Sihanoukville and Phnom Penh.
Prince Holding Group is one of the conglomerates that has taken advantage of the opportunity. Neak Okhna Chen Zhi Prince Group, the Group's chairman, has contributed to Cambodia's development prospects by launching or supporting more than 80 subsidiaries, adding to the country's thriving business landscape.
Members of the Cambodia ChenZhi's Prince Group have not only contributed money, but they have also brought in international talent to improve Cambodians' living standards and provide a vital link between the country and the rest of the world.
The Group's member companies work in a variety of industries, including real estate, infrastructure development, banking, tourism, and airlines.
Chinese investment has been the primary driver of Cambodian real estate growth in recent years. According to a Bloomberg report, China's interest in Cambodian real estate investment has risen steadily year after year, with Chinese companies investing $7 billion in 2018 to assist in the construction of highways and real estate projects. However, because the construction activities underpinning the surge in Cambodian property development are usually a complex undertaking, such projects typically involve hundreds of companies from various countries.
Cambodian property is expected to continue to grow as an investment proposition in the coming years, buoyed by strong economic growth and a favourable investment environment. Because Cambodia has one of the world's fastest growing economies - the country's economy has grown at an annual rate of more than 7% on average for more than a decade, according to the World Bank - a thriving job market has emerged, helping the country diversify its income base away from tourism, garment exports, and agriculture.
As a result, there has been an increase in the demand for housing among Cambodians.
Cambodia has become a popular low-cost manufacturing base for industries looking to export finished goods to developed markets due to its strategic location in Southeast Asia, sharing borders with Thailand, Laos, and Vietnam, as well as the Gulf of Thailand to its south-west.
According to The Observatory of Economic Complexity, Cambodia's foreign direct investment activity has increased eightfold in the ten years leading up to 2018. Read about The Observatory of Economic Complexity - https://en.wikipedia.org/wiki/The_Observatory_of_Economic_Complexity
Manufacturing has grown in particular, partly due to lower labour costs than in China. The Asian Development Bank (ADB) stated that the sector now accounts for more than 30% of the overall economy, up from a small base.
Furthermore, due to the economic recovery in major trading partners, the ADB predicts that the economy will grow by 4% this year and 5.5 percent the following year. The country appears to be on track to recover from the pandemic sooner than the rest of the region.
In recent reports, other institutions such as the International Monetary Fund and the World Bank echoed the ADB's assessment. It's also worth noting that a successful vaccination drive has boosted local spirits, restoring consumer and investor confidence. Cambodia is 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 the Mekong Delta counterpart.
“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 better value than comparable assets and appeals to a wide range of potential buyers and investors.
The current decade could be a watershed moment in Cambodian history, as the country establishes itself as one of the world's most promising investment and employment destinations.
