Cambodian Economist Is Concerned Over Overheated Real Estate Growth

Compass Cambodia report, August 5 - Ky Sereyvath, an economist at the Royal Academy of Cambodia, is concerned that overheated real estate growth is no longer beneficial to the local economy and would eventually push house costs beyond the purchasing power of the local populace.

Ky Sereyvath made the statement during an interview with RFI earlier this week, stating that, in light of the pandemic issue, the government should keep a close eye on the real estate industry while focusing on boosting producing sectors like agriculture and manufacturing.

"We [the government] will reduce [closely manage] the real estate sector since its expansion is not beneficial to the local economy. Rather, it raises property values without producing any income," Sereyvath explained.

"All of Cambodia's local production culture will be destroyed by foreign buyers. Real estate prices will eventually reach a plateau and stop rising. Then there are no more gains to be made. We'll have a hard time because we don't have any production," he continued.

The economist's findings have sparked debate among the public on whether real estate has a negative impact on the kingdom's economy.

Dr. Kim Heang, chairman of KW Cambodia and a real estate expert, declined to comment on HE Sereyvath's study, but highlighted that the real estate sector continues to play an essential role in supporting national economic progress.

"The real estate industry contributes a significant amount of tax income to the state every year." According to Dr. Kim Heang, the government generates roughly US$3-4 billion in tax revenue every year, the majority of which comes from the construction and real estate sectors.

"These taxes include stamp duty (4%), property tax (0.1%), tax on boreys or condos (6%–8%), tax on idle land (2%), and income tax (20 percent ). If a project is worth $1 billion, stamp duty and borey tax alone account for 10% of the cost, or $100 million," he noted.

Dr. Kim Heang went on to say that while production sectors are undeniably important to the economy, the real estate industry is also regarded a booster.

"The primary sectors driving the national economy are agriculture, tourism, and industry. The real estate sector, on the other hand, serves as a boost or complement to the economy, allowing it to grow even faster and larger," he added.

Aside from tax revenue, the real estate and construction sectors also assist in the creation of jobs and income for local residents, which leads to a rise in consumer spending and, as a result, GDP.

When property values grow, local individuals to some extent will benefit from the buying and selling transactions, either through commission or direct sales. These will continue to invest in the country, resulting in increased economic activity.

Returning to Ky Sereyvath's statement, he may have intended to warn both the people and the government about the dangers posed by the excessive growth of these two industries.

The warning is definitely in line with the World Bank and the ADB who frequently encourage the Cambodian government to closely watch the overheating expansion of the real estate and construction industries, especially in terms of loan growth.

International organizations encourage the government not just to tighten monetary policy on credit granted to both sectors, but also to devise regulations to restrict price increases while remaining within the free-market system.

According to some experts, the government's recent suspension of internet gambling has helped to stabilize property values in Sihanoukville. Furthermore, the imposition of a capital gains tax, which will take effect early next year, should assist to discourage speculators from driving prices substantially higher.

Source: Compass Cambodia comprehensive arrangement

Editor: Malinda         Chief Editor: Sunnie         General in Chief/Executive Producer: Nicole

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