The Cambodian Real Estate Sector Won’t Recover This Year

Between 2006 and 2007, the Cambodian real estate sector was at its all-time high in terms of value since the last day of the Khmer Rouge regime in 1979. Fast forward several decades, the 2008 economic crisis marked the start of a downward spiral for the Cambodian real estate sector. The impact of the crisis continued to interfere with the real estate sector until 2013, before economic activity within the sector picked up again, with real estate seeming to heal from the 2008 crisis by around 2017. Two years later, in 2019, a similar pattern began to take shape. The Cambodian real estate sector faces another crisis as its value once more began to decrease. When will this sector likely recover from all these destructive forces? 

For those who were involved in the real estate game in the year of 2008, one might remember both the exciting and the emotional moments of that time. Some investors were unprecedentedly profiting from those real estate game of purchasing and selling back properties at a much higher value in a short period of time. However, by looking at this time from a different angle, a certain amount of investors did not really receive the fruitful profit as they expected. Those investors kept their newly purchased properties from immediate sales, due to the idea that the price of the properties would further increase the longer they waited. But things did not go as planned. Those who were waiting for the right moment to sell and make a tremendous profit were held back by the global crisis.  

It is essential to remember that between 2006 and 2007, just a few years before the 2008 global economic crisis hit, the Cambodian real estate sector was enjoying a great momentum in relation to Korean investments. Those giant investments gave a satisfying boost to the real estate sector in Cambodia. The results can be seen in a form of high rise infrastructures such as the Golden Tower 42 (along the Monivong Blvd.) and Camko City (Located at the northern region of Phnom Penh).

Fast forward a decade, 2017 and 2019 had seen another large inflow of investment for the real estate sector. However, this time the Chinese investors were leading the way. Many of the new developments were concentrated around the area of Phnom Penh city and the seaside city of Sihanoukville as well as its ripple effect to the nearby provinces. The constant boost to the Cambodian real estate sector from 2017 to 2019 was the second historical moment for the Cambodian economy. Land prices, house prices and rent prices were beyond reach. In the city of Sihanoukville, a single traditional flat could be sold at a price of almost half a million USD. In terms of rent, that same flat could bring a monthly revenue of around $5,000. The majority of tenants who managed to rent those flats were Chinese people, and most of Cambodian nationals were the owners of those flats as well as lands. The purchasing of those properties were made under the idea that more and more profit could be made from the Chinese people alongside with other future uses.  During that specific time, the early wave of Cambodian buyers were successfully profiting from those investments. As time went by, it became apparent that nothing gold can stay. 

Amidst the ever expanding value of the real estate sector, socio-economists and the real estate investors were questioning whether the real estate sector will continue to endure such growth between 2019 and 2020. This is a question without any definitive answers. In the game of investment, there will always be a victor and there will always be a loser. Some socio-economists called it a “bubble economy” with the effect of rapid boom and bust. Others considered this quick increase as a speculation.  

Although nobody dared to predict the truth about these events, the World Bank warned about the risks that come along with boom and bust nature of real estate and construction. The World Bank’s Cambodian country manager in May 2019 warned that these two sectors were enjoying rapid expansion but that it was heading towards the inevitability of a rapid deflation. “The construction and the real estate sectors are more likely to fall into this cycle of rapid boom and burst. The increase of loans for construction puts more risk into the financial sector,” said Inguna Dobraja, Cambodia’s country manager for the World Bank.   

Several months after the analysis on this matter, more specifically as 2019 was coming to an end, land prices in Cambodia were experiencing a rapid devaluation and most importantly the real estate situation in the province of Sihanoukville were facing an exodus of Chinese investors and businesses. Why does the “bubble economy” happen in the first place? 

Three contributing factors were at play which pushed the Cambodian real estate sector into deterioration. The first factor was the 2017-2019 real estate market becoming saturated by Chinese investments. The second factor was the government’s order to outlaw all online casino operations, which forced many of the Chinese population to return back to their country. The third and obvious factor was the effect of the Coronavirus Disease 2019 (COVID-19) pandemic. 

COVID-19 has killed more than just human beings. It also killed the real estate sector in Cambodia, which explains why there are simply many more sellers than buyers. In other words, the supply exceeds the demand. Some real estate investors were unable to make any financial transaction, in hundreds of thousands of dollars, in regards of their properties. Others cannot overcome the payment of their loans to the banks. 

With so much uncertainty over the pandemic, when will Cambodia’s real estate sector recover?

This is a truly difficult question to answer. Recently, the International Monetary Fund predicted that the Cambodian economy will experience a growth rate of below zero percent in 2020. If the prediction turns out to be accurate, the real estate sector would not have any chance of recovery before 2021 or even 2022. Between that same periods, if the country’s economic health improves, the well-being of the real estate sector will likely follow the same path. 

With all these nightmares, will the real estate players still want to continue their game of boom and bust? 


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