Cambodia Real Estate Market in 2019
By
B2B Cambodia
on
- Cambodia continues to be in the Top 10 Fastest Growing Countries in the World trending at an average growth rate of 7% in the last 14 years.
- Rental yield in Phnom Penh is the third highest in Asia and Cambodia real estate property prices is among the lowest in Southeast Asian countries.
- Combined income increase of Cambodians and the stable economic environment for foreign investors paves the way for a strong 2019.
- Cambodia’s ties with China will continue to attract investments in hotels, casinos, condominiums and residential properties.
- Tourism will boost Cambodia real estate demands due to completion of airports in Sihanoukville and Siem Reap.
- Experts agree that residential investments are very promising and is a “safe bet” to say the least.
- The remarkable development in Sihanoukville is predicted to continue unabated throughout 2019.
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Cambodia’s Sustained Economic Development
Cambodia experienced two decades of very strong economic growth, averaging 7.6% Gross Domestic Product (GDP) from 1994 to 2015 and 7.0% from 2017 onward. This ranks Cambodia as the sixth fastest growing economy in the world during the past 21 years. This phenomenal growth transformed Cambodia from one of the world’s poorest countries to a lower middle-income country by 2016.![](/wp-content/uploads/2019/01/IPS-Cambodia-ADB-GDP-Growth-Rate-300x173.jpg)
Strong Real Estate and Property Market Opportunities
Out of all the frontier and emerging markets, Cambodia is one of the best countries for investment and real estate opportunities. This small country at the heart of Asia has leapt upwards in terms of economic growth in the 21st century and is only moving forward ever since. Historically, Cambodia did not rely too much on foreign capital considering that foreign investments only poured into the country in the late 2000’s. International F&B stores and retail brands were not in existence in the past decade. This lack of dependence on foreign markets like the US and European Union worked in their favor. It remained unaffected despite the Asian Financial Crisis of the 90’s, unfazed by the tech-bubble of the early 20’s, and unfaltered by the Financial Crisis of 2008. It is one of the few countries in the world that has not experienced a recession in the last 20 years primarily because there were no foreign investments during that time and Cambodia was only relying on organic income.![](/wp-content/uploads/2019/01/IPS-Cambodia-Top-10-Fastest-Growing-Economy-2018-300x175.jpg)
Understanding Rental Yield and Capital Growth
Capital growth and rental yield are different aspects but both are directly related to income-producing real estate investments. Properties increase in value when the net operating income of the property improves through rent and/or development in the location of the property.![](/wp-content/uploads/2019/01/IPS-Cambodia-Rental-Yield-in-Asia-300x184.jpg)
Foreign Property Ownership in Cambodia
There is a wide selection of real estate options for foreigners looking to get into the Cambodia real estate market. These are the methods on how an investor can legally own property in the country.- Land Holding Company (LHC) – A LHC is set up wherein the minority shareholder (the foreigner, holding 49% of the company) have all the decision making rights while the majority shareholder (a Khmer national, holding 51% of the company) has extremely limited power. Due to the cost of this structure, we recommend it for investments in excess of USD $1,000,000.
- Nominee Structure – is when a nominee hold a property in their name on behalf of a foreigner. It is a cheap, secure and fast option to purchase property and approximately 90% of foreign investors choose this structure. To lessen the risks, there are 4 security agreements used.
- Mortgage Agreement
- Loan Agreement
- Lease Agreement
- Security Agreement
Types of Property Titles
Once a property is set to be acquired, next thing to be decided upon is the type of property title to use. There are 4 main types of Property titles in Cambodia- Soft Title is the most common to acquire and ~85% of properties in Cambodia are held under this title. These titles are processed and transferred at the Sangkat (Council) and Khan (District) level within 10 business days at a cheaper cost.
- Hard Title is the strongest form of ownership wherein titles are registered at the National Level. Processing and Transfer of Ownership takes 12 weeks to be completed.
- LMAP Title stands for Land Management and Administration Project. This title is registered and is basically a hard title with geo-tagged points – GPS Coordinates. Processing and Transfer of Ownership takes 12 weeks and a transfer cost of 4% of the property value is imposed.
- Strata Title gives possession rights to foreigners by allowing for co-ownership by Khmer nationals and Foreigners. Processing and Transfer of Ownership takes 12 weeks and a transfer cost of 4% of the property value is imposed.
- This title applies only to new buildings – 2010 onward
- Foreign Ownership is limited to 70% of the total surface size of all units in the co-owned building
- Property cannot be ground floor or underground floor
- Property cannot be within 30 km of any land border
Enforcement of Cambodia’s Business Laws
Cambodia is one of the easiest countries to set up and conduct business in the Southeast Asian region. However, there was a shift in focus at various government ministries in the last few years. To allow a stronger tax revenue generation, the government started to practice stronger enforcement of laws resulting to businesses scrambling to adhere to applicable mandates. Some of the key laws affecting foreigners that were reinforced are the following:- Rigorous Imposition of Land or Property Tax – The Ministry currently do not release legal documents (certificate of incorporation, relevant licenses, etc.) until the landlord produces a property tax receipt for the corresponding year.
- Crackdown on Rental Tax – this is a 10% tax applied to rental income derived from a property. As a result, many landlords are now adding 10% to their rental fees to offset the government payments.
- Tighter imposition of Value-added Tax (VAT) – this is a 10% tax on business transactions and imports. Restaurants and bars in Phnom Penh now charges VAT on top of their menu prices.
- No soft-title in the name of foreigners – Titles under a foreign buyers’ name are not processed unless the conditions for co-owned buildings are met.
- Introduction of “Category ER” Visa – The Visa for Retirees living in Cambodia is valid for 12 months and does not require a work permit but to obtain the Visa, retirees need to show proof of financial stability from their home country.
- Rigid enforcement of Work Permit – The Department of Immigration now conducts an audit of businesses with foreign employees to ensure that Work Permits are obtained.
Cambodia Property Tax Laws
Another thing that foreign investors need to study closely before purchasing real estate property is the existing Property Tax laws in Cambodia and the additional taxes that may be imposed in the next few years.![](/wp-content/uploads/2019/01/IPS-Cambodia-Phnom-Penh-Skyline-300x115.jpg)
Property Market in 2019 – What to expect?
Despite the laws and the restrictions imposed on foreigners acquiring properties in Cambodia – it is still a clear path ahead as predicted by Grant Fitzgerald and David Murphy of IPS-Cambodia, well-known experts in the Real Estate Market. Independent Property Services Cambodia is the premier Real Estate Company in the country and has been the market leader in both expatriate and Khmer real estate since it was established in 2009. According to David Murphy, IPS-Cambodia Managing Director, “The Cambodian property market proved very resilient in 2018 and I expect this will continue into the near to medium term.” He expects rental yields to soften somewhat as further condo supply hits the market in 2019 but predicts sale prices to remain strong as property continues to be viewed as a safe investment by both local and foreign investors.Grant Fitzgerald, IPS-Cambodia Country Manager, noted that a lot of people were surprised at how the market held up this year (given there was a national election). “I believe you will see the robustness of the market carry over into 2019. There is continued demand within the local market as well as strong direct foreign investment which bodes well for a strong 2019”
Their views are further supported by forecasts from major news agency Reuters, which reported that Cambodia’s strong political ties with China and the Belt and Road Initiative attracted huge Chinese investments, resulting to construction of new hotels, residential properties, retails stores and casinos mostly in cities like Sihanoukville. “We have witnessed the remarkable development in Sihanoukville and this will continue unabated throughout 2019. Siem Reap is going gangbusters and there is huge upside in the market there due to it’s relatively low prices when compared to Phnom Penh.” says Murphy when asked where the most development is going to be in 2019. Fitzgerald shares similar views. “Siem Reap is currently experiencing another boom which will continue throughout 2019. The SR market has seen a jump in property prices over the last 6 months and we are seeing continued interest from international companies, mostly in the retail sector, to set up there and take advantage of the growing market.”![](/wp-content/uploads/2019/01/IPS-Cambodia-Sq.m.-Prices-in-Asia-300x161.jpg)