Market in Depth

Condominium prices continue to rise in Phnom Penh; rental yields are excellent

November 20, 2016

Cambodia's condominium market boom continues, fuelled by strong economic growth and continued interest from foreign investors.

During the year to Q3 2016, prime condominium prices in Phnom Penh, the country's capital, rose by 7.44% from a year earlier, to an average of US$3,190 per square meter (sq. m), according to CBRE Research. Quarter-on-quarter, prime condo prices increased slightly by 0.31% in Q3 2016.

In Q3 2016:
  • In the affordable category, the average condo price in Phnom Penh was US$1,500 per sq. m., down 2.8% q-o-q but up about 7% y-o-y
  • In the mid-range category, the average price of a condominium unit was US$2,700 per sq. m., almost unchanged from the previous quarter but up 2% from a year earlier
  • In the high-end category, the average price of a condo unit was US$3,200 per sq. m., almost unchanged from the previous quarter but up 7% from a year earlier

Sihanoukville, Cambodia's premier island and beach resort, continues to see an increase in demand from foreign investors, with more direct flights into the province, and a government plan to improve transport links. In Q3 2016, the average price of luxury resort villa was about US$3,500 per sq. m. Over the same period, the average price of high-end resort condo unit in Sihanoukville was US$2,000 per sq. m.

Demand remains strong. At the Axis Residences in Phnom Penh, over 60% of the 566 residential units were already pre-booked prior to its public launching in March 2015. Singapore-listed HLH Group's seafront development, D'Seaview, launched in January 2016, saw over 80% of its 300 units in Phase 1 subscribed by Cambodian and foreign homebuyers.

Phnom Penh property prices plunged by around 40% from 2009 to 2010 due to the global crisis. The housing market started to recover in 2011, buoyed by strong economic growth and the introduction of the new foreign ownership law.From 2011 to 2015, the economy expanded by an average of 7.2% per year, fuelled by strong tourism, garments manufacturing, and agriculture. Cambodia is expected to sustain this strong economic growth in the coming years, with projected GDP growth of 7% this year, and another 7.1% in 2017, according to the Asian Development Bank (ADB).

New foreign ownership law boosts demand
Foreigners are now allowed to own apartments and condominium units, but not land, and therefore not the first floor of buildings, under the new foreign ownership law approved by King NorodomSihamoni in May 2010.  Just after the passing of the law, tax revenues from property-related transactions soared 60% to KHR76.21 billion (US$19.5 million) in 2010, from KHR47.7 billion (US$12.2 million) in 2009.

Cambodia prime condo pricesIn 2005, the Cambodian government amended its investment law to allow foreign ownership of buildings. However, the law not then implemented and the idea floundered, since the country was then experiencing one of the biggest property booms in Asia.

Land ownership is against the Constitution and is still out of the question. Land can however be held by foreigners on long (renewable) leases and through majority locally-owned companies incorporated in Cambodia. These structures are argued by lawyers in Cambodia to be safer than legal schemes in any other South East Asian country in which foreign land ownership is formally prohibited.

Analysis of Cambodia Residential Property Market »

Rental Yields

Attractive returns on apartments in Phnom Penh

In Cambodia, apartments are a different thing from flats. Cambodia defines apartments as non-landed housing units in a building, or what is commonly known in the wider world as condominiums. Flats, also known as shop houses, are landed properties, with a ground floor, and up to two or three floors. Flats are the equivalent of row houses.

Foreigners cannot own land in Cambodia. So they can only buy apartments. We would therefore have wanted to survey the prices of apartments. However, very few, in fact almost none, are listed on the websites of realtors in Cambodia. So our survey is about the prices of flats (row houses) and villas.

Flats in Phnom Penh, Cambodi''s capital city, cost around US$3,000 per square metre (sq. m.). We surveyed flats located in the prime residential areas of Phnom Penh, like Daun Penh (KDP), Tuol Kork (KTK), Chamkarmon (KCKM), and 7 Makara (K7MKR).

Rents range from US$9 per sq. m. to US$13 per sq. m. per month. A 65 sq. m. flat costs US$600 per month to rent. A 120 sq. m. flat costs more than twice as much, at around US$1,500 per month.

The gross rental yields for flats in Phnom Penh, i.e., gross return on investment in a flat if fully rented out, ranges from 3.27% to 5.33%.

Villas are more expensive than flats, ranging from around US$3,500 to US$4,500 per sq. m., with smaller villas fetching the higher prices.

Rents are also highest for smaller villas. For example, a 150 sq. m. villa costs around US$13 per sq. m. per month, while a 300 sq. m. villa costs only US$9 per sq. m. per month.
Villas earn poor rental yields, ranging from 2.8% to 3.43%.

Read Rental Yields »

Taxes and Costs

Rental income is subject to withholding tax in Cambodia

Rental Income: Income from property earned by nonresident individuals is subject to withholding tax at a flat rate of 14%.

Capital Gains: Capital gains are subject to profits tax at a flat rate of 20%.

Inheritance: There are no taxes on inheritance in Cambodia. By law, foreigners must apply for citizenship to be able to inherit property in Cambodia.

Residents: Residents are taxed on their worldwide income at progressive rates, up to 20%.

Read Taxes and Costs »

Buying Guide

Transaction costs are low at 7.40% to 8.00%

The total round-trip transaction costs of buying property are between 7.40% and 8.00%. Much of this goes to the real estate agent, around 3%.

Foreigners will need to set up a landholding company or a lease structure, which can be more expensive than the buying cost because of legal fees.

Read Buying Guide »

Landlord and Tenant

Cambodia's rental system is pro-landlord

cambodia residential luxury housesCambodia's legal system is generally pro-landlord.

Rent: Rents can be freely negotiated and there is no specific tenant protection law.

Tenant Security: There are no limits to the duration of leases, though residential long-term leases usually last for one year. However, the rental agreement may be terminated prior to expiration if either the tenant or the landlord serves a notice one or two months before termination.

Read Landlord and Tenant »


Amazing economic growth

cambodia gdp inflationCambodia has experienced enormous economic growth over the past few years. From 2000 to 2003, the Cambodian economy grew by an average of 8%, and then by an average of 11.1% from 2004 to 2007. Growth is concentrated in tourism and the textile sector, which is dependent on most favoured nation status agreements.

After a slight pause during the global crisis, trom 2011 to 2015, the economy expanded by an average of 7.2% per year, fuelled by strong tourism, garments manufacturing, and agriculture.

Garment exports account for about 73% of Cambodia’s commodity exports. They rose by 10.8% in the first half of 2016 from the same period last year.

Cambodia is expected to sustain its strong economic growth in coming years, with projected GDP growth of 7% this year and another 7.1% in 2017, according to the Asian Development Bank (ADB), amidst continued growth in tourism and garments exports.

In September 2016, the inflation rate was 3%, according to the Ministry of Economy and Finance (MEF). From just 1.2% in 2015, inflation is expected to edge up to 3.7% next year, based on projections released by MEF.

Cambodia gdp per capitaRecently, Cambodia’s economic status was officially raised by the World Bank from low-income to lower middle-income economy.Lower-middle-income countries are those with a GNI per capita between US$1,026 and US$4,035. In 2015, Cambodia’s GNI per capita was US$1,070.

“Two decades of economic growth have helped make Cambodia a global leader in reducing poverty,” said the World Bank. The country’s poverty rate dropped from 53% in 2004, to 10% in 2013, and is expected to fall further for both urban and rural households throughout 2015-16.

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