Property prices in Phnom Penh’s prime residential locations increased by 13.7 per cent in the first half of 2014, while prime office development land prices increased by 7.6 per cent, according to Knight Frank Prime Asia Development Land Indices.

Ross Wheble, the independent global property consultancy’s country manager, said the main driver was the improving quality of new development projects, which were catering to previously unmet demand.

“The increase in land prices is not so much due to an increase in demand per se, but due to the fact that better-quality developments are being constructed, which are commanding higher prices, thus enabling developers to charge more for land,” he said.

The research showed that Bangkok, Jakarta and Phnom Penh all saw big increases in residential and office property prices. Bangkok had the largest increase in the price of residential sites with 18.2 per cent, followed by Phnom Penh with 13.7 per cent and Jakarta with 11.6 per cent.

The land value was calculated using the “residual method” of valuation, which is based on the gross development value of a project minus construction, finance, legal and marketing costs, and an allowance for developer’s profit, Wheble said.

The main focus for office land is the capital’s emerging central business district around Canadia Tower, which is the main banking and commercial area in Phnom Penh.

For residential land, the focus is on Boeung Keng Kang 1 and Tonle Bassac, he added.

Despite the growth of prime residential and office sites, property prices in Cambodia are still generally lower than in the majority of other Southeast Asian countries, he said.

“Based on the way that we assess land values for the index, growth in prime land prices will moderate during the second half of the year, as it is unlikely that any residential projects will be launched with prices in excess of $3,000 per square metre, whilst Grade A office rental rates are likely to consolidate now that new supply (Vattanac Capital Tower) has entered the existing stock,” he said.