The condominium market in the Cambodian capital Phnom Penh continued to expand at the tail end of 2014, with early investors in centrally located developments enjoying capital gains of up to 30 percent from early off-plan purchases.
Research from CBRE noted that development activity of high-end condominiums is set to continue in prime residential locations, with developers also looking to offer luxury projects outside of core residential districts.
The real estate firm continued to witness strong interest from the wider Asia-Pacific region, with increasing investment from Singaporean, Japanese, Hong Kong and Chinese residents. Although the comparatively high yield guaranteed by a number of leading developers is appealing to overseas purchasers, the main driver remains anticipated capital growth.
It said there are currently 35 condominium projects in Phnom Penh, including both finished projects and developments currently under construction, and the first three months of 2015 will see the sales launch and ground breaking of Sovann Condominium, a 104-unit luxury development on Mao Tse Tong Boulevard, BKK1. Sky Villa Tower, comprising 254-units across two towers, is also due to start construction on Sihanouk Boulevard with completion set for 2017.
CBRE noted that Phnom Penh is experiencing a significant increase in supply, with De Castle Royal delivering 414 condominium units in Q3, 2014 and with Galaxy Residence a further 44 units in Q4 of last year.
Overall supply in Phnom Penh is due to increase by 533.75 percent by the end of 2018, driven by large-scale new projects such as D.I. Riviera and Olympia City, both currently under development by OCIC.
Historically, sales of condominiums in Phnom Penh have been heavily marred by failures of developments that have been sold off-plan and subsequently ceased construction, noted CBRE.
With the successful completion of key projects, such as De Castle Royal, this trend has ended as confidence grows amongst domestic and international purchasers.
Early purchasers of off-plan condominiums in successful schemes have achieved healthy capital appreciation over the past year, with those who purchased in 2008 being in a position to resell for a premium of up to 30 percent over the course of 2014.
Achieved prices for high quality condominium units range from US$1,500 to US$3,000 per sqm in central areas of Phnom Penh. The Bridge, which is due to deliver a 762-units, accounts for the upper figure, is said.
According to CBRE, demand for condominiums is anticipated to increase and be met by supply over the course of 2015 through to 2016. The introduction of high quality projects in central locations will offer prospective investors an opportunity to acquire products that focus on the needs of a heavily expatriate driven area of the Phnom Penh residential market, as foreign nationals continue to require exclusive and up market accommodation in prime locations.
Demand is also increasing from an ever more affluent domestic population, which is due to account for a notable proportion of purchasers over the coming years. Domestic demand is a key element of a successful condominium project, due to foreign ownership of an individual building restricted by law at 70 percent.
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
