Yet again there is a report that legislation to allow foreigners to buy property in Cambodia freehold is about to become law, according to a new report in the New York Times.
During the last boom Cambodia property became very popular with investors from all around the world, and rightly so; people were buying property and selling 6 months later for a 12% profit, 12 months later for a 24% profit on a regular basis. During this time a report that the government was coming closer to allowing foreigners to buy freehold would make the news at regular intervals -- we all waited and waited but it never came.
I was interviewed by a journalist from the Phnom Penh Post round about October 2007, and he asked me if I thought the law would go ahead, depending on who was elected (elections were coming up). I said, at the moment the government doesn't need to change the law, because the economy and property market are doing well, but I see prices levelling off in the next 6 months, at which point the government of the day may reconsider the law.
I was right about prices levelling off; little did I know that this would be followed by Cambodia and many other nations falling prey to the global downturn. Now that Cambodia has suffered quite badly, it is entirely possible that the government may make it easier for foreigners to buy property, as an incentive to choose the country and hopefully cash-in on the rising investment levels seen in other Asian nations.
At the moment foreigners can only buy Cambodian property by setting up a company with a Cambodian senior partner. If they don't want to go that route then they must buy on leasehold, though some developers are giving 99 year leasehold tenures which is full ownership according to some judicial systems.
At this stage however, it is unlikely that changing the law would have a major impact on Cambodian property investment -- certainly nowhere near the effect it would have had during the boom. The international real estate investment landscape has changed; currently the best opportunities lie in established markets, where below market opportunities abound. Established markets are also currently the favourites because of the reduced appetite for risk among private investors.
That said, Cambodia will always be one of the top emerging markets for property investment in my opinion. Before the downturn the economy was growing at a blistering pace of 10-11% per year, based on massive growth in the industrial and services sectors, with construction and real estate also generating significant revenues. This economic growth continued to increase the affluence of Cambodians, and property values and rents continued to grow.
Cambodia has also been left with a number of unique traits from the brutal Khmer Rouge rule:
* Most of male population is under 25; a young vibrant workforce
* Both commercial and private property sectors are relatively new, so pricing is still finding its grounding
* A determination among the entire population to drive the nation forward and to reach their full potential.
These traits made it very popular for retail and commercial investment, on top of the astonishing economic growth. It is likely that Cambodia will regain its popularity with property investors once the economy can return to growth, and the massive bargains start to dry up in established markets. If the new law is improved it will no doubt increase the fervour of this boost.
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