Phnom Penh's Real Estate Is Emerging For International And Local Investors

According to a new report published by local real estate consultancy “Independent Property Services Cambodia (IPS Cambodia),” Cambodia’s capital city, Phnom Penh, is increasingly standing out to international and regional property investors due to its unique affordability for new condominium purchases, alongside world-class rental return rates for completed condominium units in the city’s downtown quarters.

The IPS Cambodia analysis, entitled “Why Phnom Penh is Southeast Asia’s New Real Estate Hotspot,” explores market conditions for foreign ownership of real estate in Phnom Penh and compares the latest price trends to other popular regional and global real estate investment markets.

The report identifies, based on 2023 data, that in terms of the average cost per square meter to purchase inner-city condos in Phnom Penh, investors can expect to pay around US$2,300 per square meter.

This pricing is still highly competitive when compared to a plethora of Asian and global capital cities, the report noted; meanwhile, there remains significant value and capital appreciation potential in Phnom Penh due to ongoing growth in both population and investment.

In comparison, Dubai, which is the UAE’s capital, averaged US$3,900 per square meter; Vietnam’s Ho Chi Minh City averaged US$4,700 per square meter; and Bangkok, Thailand’s capital city, averaged US$5,650 per square meter for inner-city condominium buyers as of 2023.

Meanwhile, compared to other global real estate markets, Phnom Penh’s prices remain highly affordable.

In Seoul, South Korea, average purchase prices reached US$21,200 per square meter in 2023; Singapore averaged US$20,150 per square meter; and Shanghai city, China, US$17,900 per square meter.

Despite the low purchase prices, Phnom Penh condos are demonstrating world-class rental returns, according to the report’s findings.

In terms of average gross rental return per annum for inner-city condos, during a 2022 to 2023 survey period, Phnom Penh condos averaged an annual return of 7.5 percent (as calculated based on a proportion of the original purchase price).

As stated by the report, “rental yields on condominiums in Phnom Penh are among the highest in Asia and beyond.”

According to the findings, Phnom Penh’s rental return rates matched Vietnam’s Ho Chi Minh City, which also averaged 7.5 percent per annum.

In comparison, Dubai witnessed average annual returns of 5 percent; Bangkok averaged 4.5 percent; and Germany’s capital city, Berlin, earned an average of 3.75 percent yearly for investors.

Meanwhile, Phnom Penh’s average returns for investors also outweighed some of the world’s most renowned and expensive cities.

In Seoul, South Korea, average return rates were just 1.75 percent per annum; London, UK, averaged 2.25 percent; and USA’s New York City also demonstrated yearly returns of just 2.25 percent.

Importantly for the real estate sector’s long-term prospects, the report said that domestic demand for housing is also growing rapidly in Cambodia, thanks to a particularly youthful demographic.

In comparison to Vietnam, urbanization rates are close to 40 percent already, and in Thailand, around 50 percent.

Given these demographic indicators, the IPS report contends that Phnom Penh real estate demand is only set to surge in the coming decade.

Another important factor supporting foreign property investments in Phnom Penh is that the city is becoming a popular living destination for expatriates, “attracted by a relatively low cost of living, vibrant cultural scene, and modern conveniences.”