{"id":1464,"date":"2019-03-15T01:07:48","date_gmt":"2019-03-14T18:07:48","guid":{"rendered":"https:\/\/capitalcambodia.com\/?p=1464"},"modified":"2019-03-15T09:45:05","modified_gmt":"2019-03-15T02:45:05","slug":"can-the-middle-class-save-the-condo-industry-from-itself","status":"publish","type":"post","link":"https:\/\/capitalcambodia.com\/can-the-middle-class-save-the-condo-industry-from-itself\/","title":{"rendered":"Can the middle class save the condo industry from itself?"},"content":{"rendered":"

Developers must shift focus to local demand to sustain an industry that is reaching a tipping point<\/em><\/p>\n

Phnom Penh is experiencing an oversupply of high-rise units that could inevitably transform the young industry, mainly focussed on foreign buyers and luxury condominiums, into one that is local market-centric.<\/p>\n

One of the key concerns is the saturated luxury condo market in the city centre where developers are overdependant on foreign buyers and has no appeal to the domestic market because of its price point. An example of this oversupply can be seen in Embassy Central, a new 119-unit condo in Boeung Keng Kang I that will have units available in May. The price for a one-bedroom unit to a penthouse would range from $3,600 to $4,150 per square metre. It is a market that solely caters to foreign buyers. But is this approach sustainable as the industry reaches a tipping point?<\/p>\n

The figures paint a startling picture<\/strong><\/p>\n

Condominium projects with move-in ready units will raise the market supply by 120 percent this year, according to CBRE Cambodia. In 2018, the number of units peaked at 14,173 and by the end of 2019, it could climb to 30,112, which is a shocking contrast to figures in 2016 when only 3,000 units were registered.<\/p>\n

The government seems to have taken notice considering the number of new project approvals by the Land Management, Urban Planning and Construction Ministry slowed down considerably at the end of last year.<\/p>\n

\u201cThe threat of oversupply has a drag on the performance of condo sales because it could place pressure on rental yields, and then on the price of the secondary market,\u201d says James Hodge, associate director of CBRE Cambodia.<\/p>\n

Oversupply seems to occur at the top end of the condo spectrum. The high-end luxury condo segment itself will see a 243 percent increase this year. The luxury segment is dominated by foreign buyers who are mostly Chinese nationals. Nearly all property showrooms in Phnom Penh have Mandarin-speaking sales agents. Realtors often organise Chinese tour groups for the purpose of investing in such units.<\/p>\n

\u201cTo purchase high-end properties, foreign customers borrow from their own overseas banks because they enjoy better interest rates than here,\u201d says Grace Rachny Fong, chief executive officer of Century21 Cambodia.<\/p>\n

The condo market revived in earnest in 2013. During that time, The Bridge development, a 762-unit project near Koh Pich, showed local investors and Singaporean companies could work successfully together.Along with the Singaporeans, South Koreans and Taiwanese expanded into the then nascent condominium market, buoyed by relaxed property laws. Around the time President Xi Jinping visited in 2016, Chinese developers such as Guangzhou Yuetai Group, Prince Real Estate, and Jiayuan International Group entered the market. To date, they jointly have between 1,000 and 5,000 units that are under construction.<\/p>\n

The initial exuberance on the side of the developers after The Bridge for central district luxury condos is being realised this year. The companies believe that foreign buyers would be willing to pay a premium for the most expensive real estate districts in the Kingdom such as Daun Penh, 7 Makara, and Chamkarmon. Central area high-end projects The Skyline with 729 units, The Penthouse Residence (458 units) and One Park (1,636 units) would be ready this year.<\/p>\n

\u201cThroughout 2014 and 2015, the majority of developers focussed on central districts where higher land prices and premium addresses naturally meant that the projects would be in the high-end or mid-range categories,\u201d Hodge says. But as these projects come to fruition it might cast a long shadow on property overhang.<\/p>\n

\u201cSo far, this has not translated into substantial adjustments on pricing (but) it is clear that developers are now more open to negotiations and are willing to consider incentives,\u201d Hodge adds.<\/p>\n

Affordable segment development<\/strong><\/p>\n

Local developers have shifted to more suburban areas and affordable price points. The mid-tier condos around Sen Sok district\u2019s Aeon II area start from $1,000 to $2,000 per square metre and $850 to $1,000 per square metre for basic affordable condos with less amenities, says Chrek Soknim, chief executive offcer of Century 21 Mekong. The Sen Sok Town III project near Aeon II, for example, completed 468 units catered for domestic mid-tier buyers last year.<\/p>\n

\u201cThere are several projects around Aeon II that (interest) locals (who) are buying condos as an investment or for their children who are studying overseas. When these children return, they can start their lives with their own families. It is a good location as it is near an urban centre, surrounded by schools, shopping malls and other amenities,\u201d Fong explains.<\/p>\n

The focus on the affordable range is becoming more pronounced as developers shift towards the domestic market by catering to their needs and demand.<\/p>\n

This is evidenced by the strategies employed by marketing units to entice locals with special discounts, free appliances, and raffle prizes. Developers are also pairing up with banks to offer attractive interest rates for long-term loans to lure young and first-time home buyers. The impact of banks on developers and buyers, and vice versa cannot be overstated. Both are creating an environment where local demand is possible.<\/p>\n

\u201cProperty investment and real estate developments are the ones that are driving the growth of banks,\u201d says PPCBank president Shin Chang Moo.<\/p>\n

For the industry to develop and remain sustainable, developers must now reach out to young professionals and families. While most may be priced out of the luxury and mid-tier condo market, the mid-tier market is growing as buyers are willing to invest due to the availability of financing options.<\/p>\n

\u201cLocally-developed and reasonably-priced affordable developments typically appeal to Cambodia\u2019s rising middle class,\u201d Hodge says. Increased take-ups in the affordable sector has encouraged other developers to enter this segment.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Phnom Penh is experiencing an oversupply of high-rise units that could inevitably transform the young industry, mainly focussed on foreign buyers and luxury condominiums, into one that is local market-centric.<\/p>\n","protected":false},"author":3,"featured_media":1436,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_FSMCFIC_featured_image_caption":"","_FSMCFIC_featured_image_nocaption":"","_FSMCFIC_featured_image_hide":"","footnotes":""},"categories":[257],"tags":[250,249,25,252,251],"yoast_head":"\nCan the middle class save the condo industry from itself? - CapitalCambodia<\/title>\n<meta name=\"description\" content=\"Phnom Penh is experiencing an oversupply of high-rise units that could inevitably transform the young industry, mainly focussed on foreign buyers and luxury condominiums, into one that is local market-centric.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/capitalcambodia.com\/can-the-middle-class-save-the-condo-industry-from-itself\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Can the middle class save the condo industry from itself? 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