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2021: 5 keywords to describe Cambodia Real Estate Market in 2021

2022-01-15
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Summary:Though 2021 was gone in just a blink of an eye. 2021 brought us unforgettable moments. As the epidemic continues, all sectors were affected and in an unstable stage as well.

Though 2021 was gone in just a blink of an eye.

2021 brought us unforgettable moments. As the epidemic continues, all sectors were affected and in an unstable stage as well.

As a rapid development in Cambodia's Real Estate and Construction sectors in the last few years, people pay serious attention to see how these sectors get affected by the epidemic and what is going to happen in 2022?

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At the start of 2022, Compass Real Estate sorted out 5 keywords to conclude Cambodia's 2021 property market. Let’s have a look!


Keyword 1: Tax Free

In 2021, Cambodia's "2.20 Community Event" broke out and the epidemic intensified. The capital gains tax, which was originally scheduled to take effect in July 2020, was postponed to January 1, 2022. After the new tax system takes effect, the government will levy a 20% tax on capital gains from the sale of Capital. The capitals including real estate, asset leases, asset investments, corporate trademarks, intellectual property and foreign currencies will be subject to capital gains tax.

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In order to further respond to the crisis brought by the epidemic and ease the economic pressure of the citizens, the Cambodian government announced that the stamp tax for the purchase of houses below US$70K will be exempted for the whole year of 2021 until January 1, 2022.

Recently, after a series of research and measurements by the government, the government decided to continue to postpone the stamp tax until January 1, 2023. This decision will greatly help the real estate industry affected by the epidemic, while also encouraging owners to buy and sell properties in times of crisis.


Keyword 2: New Investment Law

Cambodia's "New Investment Law" officially came into effect on October 15. It was established to attract investors and improve Cambodia's investment environment. The law aims to establish an open, transparent, predictable and investment-friendly legal framework to more effectively attract domestic and foreign investors, thereby promoting Cambodia’s economic and social development.

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The passing of the new investment law has many impacts. This law enhances the stability and predictability of investment, and adds preferential measures on the basis of existing laws, which will undoubtedly increase investor confidence. In the long run, it is more strategic for Cambodia's development.

Since the outbreak of the epidemic in 2020, the global economy has undergone profound changes. Under the background of the Cambodia-China Free Trade Agreement, the Cambodia-Korea Free Trade Agreement, and the Regional Comprehensive Economic Partnership (RCEP) are about to enter into force, the GSP in the United States and the United Kingdom and the EBA framework with the European Union, the new investment law is just come in time, and will attract more investors to invest in Cambodia, bringing new opportunities for Cambodia's economic development.

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With the entry into force of the new investment law, Cambodian real estate investment will encounter the heat up again, and at the same time, it will also drive the value of the Cambodian real estate market soaring.


Keyword 3: Multiple landmarks arise

Although the epidemic is still ongoing, which has hindered the construction industry and prevented many projects from being delivered on time, Cambodia is still actively promoting the construction of various large-scale projects, adding impetus to Cambodia's economic recovery after the epidemic.

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In the capital Phnom Penh, the new Phnom Penh International Airport is 27% completed and is scheduled to be put into use in 2023. The new national stadium "Techo National Stadium" was officially completed and put into use. Naga 3 began to break foundation works, and the overall project construction is expected to be completed in 2025.

In Siem Reap, although the COVID-19 epidemic has had a certain impact on the construction of New Siem Reap International Airport, three important stages of the project are still progressing in an orderly manner and are expected to be completed and put into operation in 2023 as originally planned.

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In Koh Kong Province, Dara Sakor International Airport is 95% complete and is expected to be commissioned in early 2022 or in the first quarter. If successful, it will be officially opened in mid-2022.


Keyword 4: Heating Up

The epidemic in 2021 had a huge impact on the real estate industry, especially the apartment industry. The rental and sales market for mid-range and high-end condominiums saw a sharp drop in business volumes in the first quarter as most foreigners left Cambodia. Even so, most people in the industry are still optimistic about the Cambodian real estate industry. First, because the real estate market itself is very flexible and controllable. Once the epidemic is under control, the real estate industry will heat up back very soon. Second, it is closely related to the real estate industry. From the perspective of the construction industry, the real estate investment market has remained stable. Although the epidemic has brought a certain impact, the construction industry, which is expected to decline by 50%, has shown a growth contrary to the trend, which has brought great confidence and confidence to real estate investors' hope.

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In the second quarter, the severity of the epidemic and the implementation of city lockdown measures in Phnom Penh, further impacted the Phnom Penh apartment market, resulting in a decline in both the price and rental of apartments of all grades. The market for local homebuyers has become narrow and competition among developers has become more intense, with multiple promotions by developers still unable to boost the market up.

In the third quarter, the epidemic continued to have an impact on the real estate market. The total supply of townhouses and apartments increased by 0.5% from the previous quarter, but people’s demand for real estate did not increase accordingly, which also led to an oversupply in the Cambodian real estate market. In terms of rents, apartments of all types fell by 5.6%-7.8%, resulting in a new record on low rental yields for apartments.

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In the last four months of 2021, everything seems good. Measures such as the government's announcement to reopen the country and the lifting of quarantine regulations for inbound tourists have all benefited the real estate and construction industries. The revival of international tourism is excellent news for Cambodia who is highly dependent on tourism, and also for the real estate and construction industries. And with the gradual return of foreign investors, the real estate industry is expected to recover rapidly.


Keyword 5: Looking to the future

With the epidemic under control in Cambodia, the once prosperous real estate industry will soon heat up. According to data released by the Ministry of Finance and Economics in December, registered construction projects cost US$10.35 billion, and about 87% are residential construction projects.

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Deputy Prime Minister and Minister of Finance and Economics Aun Porn Moniroth has said that the Cambodian real estate industry is expected to recover rapidly in 2022 amid a gradual increase in foreign investment inflows and strong growth in domestic investment demand for affordable housing. He predicted that the Cambodian real estate industry will recover at a rate of 4.8% in 2022, in line with global trends and changes in national development. Despite the impact of the epidemic and lower real estate prices, Cambodia still has high investment potential.

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Real estate experts said that whether Cambodia's real estate industry can recover depends on three major reasons including the return of old investors, new investment by wealthy Cambodians overseas, and the continued investment by local developers. He also predicted a strong recovery in Cambodia’s real estate industry in 2022, with the influx of foreign investors likely to be as high as 30%-40%.

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Overall, as the world, including Cambodia, moves towards a new normalcy under the epidemic, the recovery of Cambodia's real estate industry is very optimistic. However, real estate experts also said that although the sector will recover quickly, it will not return to the level of the pre-pandemic era in 2019. However, we believe that after the epidemic in 2021, various industries in Cambodia will recover in 2022 even if it is just a small step recovery or not, and the real estate and construction industries will finally usher in spring.

  • ---------------------------------- The End ----------------------------------

Disclaimer: The re-forward articles on Compass website are for the purpose of conveying more information, and it does not mean that the Compass website agrees with its views or confirms the authenticity of its content. Article noted as "Source: Compass original", please note that the source from Compass. The content of the article is for reference only and should not consider as investment advice, and it does not mean that Compass agree with its views.

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