Written by Gabriel Fauveaud.

Since the beginning of the 1990s, real estate became a key element of the economic growth strategy in Cambodia. Phnom Penh, the capital city, welcomes a large number of domestic and foreign real estate investments.

The empowerment of local stakeholders and the arrival of – mostly Asian – foreign actors since the 1990s have made the real estate markets evolve rapidly (see Fauveaud 2014, 2017). After the multiplication of residential projects in Phnom Penh’s peri-urban areas as well as the construction of satellite-cities, the building of condominiums in the inner city represents one of the latest evolutions of the capital city’s residential market. This trend was enabled in 2010 when foreigners were authorised to own properties from the first floor up. For local real estate experts, the rapid spread of condominiums in Phnom Penh is seen as a consequence of the high price of land (high-rise buildings do not need a lot of land), an oversupply of homogenised housing products (villas, townhouses, etc.), and an evolution of customer tastes.

Indeed, the larger metropolises of Southeast Asia have become too expensive for smaller speculators, therefore second-tier cities are playing a growing role in structuring transnational real estate investment flows for an increasing number of mid-range Asian investors.

Generally, condominiums are perceived as a sign of modernisation of the capital city of Cambodia, in the footsteps of iconic regional metropolises, such as Bangkok or Singapore. However, a closer look at why so many condominiums are currently under construction shows that Phnom Penh is becoming part of new transnational financial flows: speculative investments made by middle and upper socio-economic groups from the wealthiest Asian countries.

Ill. 1: A high rise and condominiums in the Boeung Keng Kang districts of Phnom Penh (credit: Fauveaud, 2015)

In Phnom Penh, condominiums have been developing in all parts of the city, but they concentrate in a few central districts in the south part of the downtown (mainly in Boeung Keng Kang districts). Three main types of condominiums are being developed: 1) towers with basic services and limited fees; 2) medium-range condominiums with better services and an attention paid to design; and 3) exclusive projects reserved for the wealthiest. Condominium investments, include joint-ventures between local and foreign developers, joint-investments between different Cambodian developers, and single investments by a local developer. The latter category includes various types of businessmen, from rich entrepreneurs with limited construction experience, to young professionals trained in architecture abroad.

The foreign developers and investors come mainly from Singapore, South Korea, Taiwan, Japan, Hong Kong, and mainland China. According to my interviews, the 60 to 70 percent of the units are mostly bought by foreigners. Most of the foreign developers and investors advertise the finished product in their country of origin.

They also collaborate with the regional branches of international brokers, or with intermediaries specialising in foreign investments to attract individual investors. This is seen in the case of the Peak Project, developed by Oxley Worldbridge, a joint-venture between a Singaporean and a Cambodian company. The developer collaborated with Knight Franck (one of the world’s largest real estate brokers that has been present in Cambodia for the last decade) and Hutton (the biggest real estate agency in Singapore) to promote the project in Asia. The two brokers organised and financed investor meetings in different parts of Asia in order to boost investments. Following the same strategy, they hosted two opening events to kick off the sales at the Peak, one in Cambodia in September 2015, and another a month later in Singapore. Oxley Worldbridge also advertises in Taiwan, Macau, and Singapore, using newspapers and websites. The company even used a famous Singaporean actor, advertising that he was also buying a condo to underline the benefit of investing in Cambodia; even if he himself had “never visited” the country.

International buyers come from different countries and have various socio-economic profiles. For most of them, buying a condominium in Phnom Penh is an investment from which they hope to make a quick economic return. Indeed, many foreign developers promise high rental yields (percentage of the initial investment annually earned), generally between 6 and 8 percent per year. In order to attract more investors, some companies even guarantee a specific rental yield for the first two or three years following the purchase of a property.

In this context, transnational real estate intermediaries (i.e., brokers, investments advisors, bankers, etc.) play a key role in developing regional investment flows. An office of Century 21 (one of the world’s largest international real estate brokers) located in Boeng Keng Kang is actively promoting condos abroad, mainly in Taiwan and Singapore, through the local Century 21 franchises. Brokers and individual intermediaries sometimes arrange ‘all-inclusive investments trips’ for their clients. It is a way to visit different projects, as well as to get an idea of the urban environment which will contribute to informing the value of the investment (urban landscape, location of the project, tourism economy, state of the infrastructures, etc.).

According to my interviews with real estate agencies, small investors from mainland China are particularly receptive to these practices. Developers also notice a recent increase of Japanese investors. Sometimes a Japanese individual will acquire up to 40 percent of the units in a building – staying within Cambodian law which stipulates that a single buyer cannot acquire more than 70 percent of the units of a condominium. According to Cambodian real estate brokers, it is also common for Japanese households (especially retired people) to put a mortgage on their property in Japan in order to buy one or several condominium units Phnom Penh. In these cases, the buyers are expected to pay back their mortgages with rental fees, or to make a profit by reselling the unit quickly.

In this article, we have seen how the “condofication” process in Phnom Penh is both a cause and an effect of the internationalisation of the Cambodian real estate market. Indeed, the larger metropolises of Southeast Asia have become too expensive for smaller speculators, therefore second-tier cities are playing a growing role in structuring transnational real estate investment flows for an increasing number of mid-range Asian investors.

For real estate professionals, these cash flows are creating new possibilities of generating profit from investments in potentially risky markets, and extracting capital from small speculators who are less likely to invest in their own domestic markets. Ultimately, the “condofication” is accelerating the gentrification process of downtown areas and the exclusion of the most vulnerable households for the benefit of developers, small speculators, and the multitude of intermediaries who are always looking for new strategies to extract land rent.

Gabriel Fauveaud is a visiting professor in the department of Geography and in the Program of International Studies at the University of Montreal. His research focuses on the contemporary evolution of the cities of the ‘global south’ and includes elements of human and social geography, political geography, urban planning, and political economy. (Image credit: author, 2015).  

Further readings:

Brickell, K., & Springer, S. (Eds.). (2016). The Handbook of Contemporary Cambodia. Taylor & Francis

Fauveaud, G. (2015). La production des espaces urbains à Phnom Penh. Pour une géographie sociale de l’immobilier [The production of urban spaces in Phnom Penh. A social geography of real estate]. Paris, Publications de la Sorbonne