The latest report from global property consultancy Knight Frank shows that Phnom Penh’s overall property prices rose a staggering 26.2 per cent in 2015, far higher than any other city in the Asia Pacific region.

According to the Knight Frank Prime Asia Development Land Index, the cost of residential land in Phnom Penh rose by 10.6 per cent in the second half of 2015, cooling somewhat after a meteoric first half, bringing the capital in just behind Tokyo as the city with the greatest rise in land values in the region.

Knight Frank’s Nicholas Holt, head of research for Asia Pacific, said, “the confluence of easing construction costs and rising residential prices and office rents propelled Phnom Penh’s prime land prices upwards.”

“Although the growth rates in [the second half of] 2015 moderated slightly from the previous six months, they nonetheless were among the fastest in the region,” he said.

In terms of office costs, the second half of 2015 saw a slowdown of price inflation, but the year as a whole saw a massive rise of 19.2 per cent.

The land price rises see Phnom Penh leapfrog regional rivals such as Bangkok, Ho Chi Minh City, Jakarta and Guangzhou. Whether or not this is a distinction that Phnom Penh particularly wants to earn is not yet immediately clear.

Holt noted that the only market which outperformed Phnom Penh is Tokyo, wherein its recorded prime residential land index is the most rapid amongst cities tracked in the second half of last year.

“With Japan joining the negative interest rate club, there could be more yield compression and price appreciation,” Holt stated in the report.

Nevertheless, Knight Frank Cambodia’s country manager Ross Wheble said that “as evidenced in the moderation of price growth during 2015’s second half, we expect [the] trend [of growth in residential and prime office] to continue in 2016 as land values in prime locations begin to plateau.”

However, it is unlikely that Phnom Penh will retain its current near-top ranking, as, according to Wheble, “we forecast that Phnom Penh will move down the rankings over the next two years”, although without any significant decline in land prices.

“The Kingdom has great future potential across all sectors of the economy, which will continue to attract investors and drive demand for real estate development, both residential and commercial.”