The Singaporean developer behind The Bay, a $500 million mixed-use real estate project on the capital’s Chroy Changvar peninsula, has announced it is putting the residential phase of the project on hold due to unfavourable market conditions – a move that could herald the first major casualty of a looming real estate bubble, property analysts said yesterday.

TEHO International Co Ltd, the SGX-listed parent company of The Bay’s developer and marketing firm, said in a filing on Friday that it had suspended construction of The Bay’s residential towers, citing concern that Phnom Penh faced an imminent glut of supply in condominium units.

“There is a heightened risk of oversupply of condominiums as condominium supply is expected to increase significantly through to 2018,” it said. “In the best interests of the Group’s ‘The Bay’ project, and having considered the market conditions in Phnom Penh and other factors, the Group and its joint venture partner have decided to put on hold the residential development phase of the project.”

The company said it would work with its local joint venture partner to assess the market changes and “reposition the development project”.

TEHO International formally launched its Cambodian flagship real estate project in February 2015. The project envisioned six towers ranging from 45 to 55 floors, with a total of over 2,000 residential units, and a 250-room luxury hotel. Its first phase, comprising 688 condominium units, was slated for completion by 2019.

Ly Sen Leap, CEO of Furi Real Estate, a local property sales firm with an exclusive listing over The Bay, confirmed yesterday that TEHO International had informed his company of its decision to postpone development of The Bay. He said investors who purchased condominium units in the first phase of the project had already received their deposits back.

“TEHO is a highly responsible project developer, so they returned the money that clients had deposited,” he said, declining to reveal how many units had been sold.

Sen Leap insisted that the mixed-use project was not dead, just delayed. However, he could not confirm whether the non-residential portions of the project, including a 45-storey hotel tower to be operated by Japan’s Okura Hotels & Resorts, would continue.

“TEHO did not quit the project,” he said. “It just delayed the development project, so it will not affect the industry as a whole.”

The Singaporean firm’s peninsular development faced an early hurdle when the project made headlines after footage emerged of its local partner, property tycoon Sok Bun, viciously attacking a female television presenter in a restaurant. Bun’s interest in The Bay has since been transferred to Yim Chhay Line, daughter of Deputy Prime Minister Yim Chhay Ly.

The project has also faced deteriorating local market conditions, with both condominium sales slowing and prices falling as developers continue to announce new projects.

The latest market survey by property firm Knight Frank (Cambodia) identified 2,979 condominium units in the capital, with an additional 3,184 units expected to enter the market by the end of the year.

Meanwhile, more than a dozen new projects comprising over 5,400 units have been launched since the start of the year, putting downward pressure on sales and prices.

“If all monitored projects complete on schedule, the condominium sector is forecast to grow by 723.5 per cent with the addition of 24,533 units by 2020,” the report said.

Amid growing concern of oversupply, sales of newly launched projects slowed to 929 units during the first half of 2016, a 27 per cent decline compared with the same period last year, Knight Frank said. Prices also fell sharply, with the average price per square metre on these units falling to $1,823 in the second quarter of 2016, down 36 per cent from the first quarter.

Sear Chailin, CEO of real estate firm CL Realty, said too many developers are building condominiums in Cambodia, which has led to an oversupply that could see more project revisions.

“The demand for condominiums in our country is still small and is lower now that it was a few years ago,” he said. “The developers who first invested in the property sector seized a good opportunity as they caught nearly all of the potential market. Those who came late face a tough challenge.”

Chrek Soknim, CEO of Century 21 Cambodia, said he has also witnessed a slowdown in condominium sales this year, which he attributed to the market responding to the oversupply of units.

However, Soknim said that while dozens of condominium projects had received construction approval, the majority of them would not be ready for several years and the supply glut would not really be an issue before 2020.

“There is a bit of oversupply, but the actual amount of units available in the market is still limited,” he said.

While Soknim played down concerns over a property bubble bursting, he said Cambodia’s condominium market had reached a “mature status”, which he said means developers must have sufficient capital to push through with their projects in any situation.

“It is time for competitors to earn the public’s confidence by investing in their project until it is completed,” he said.