As property prices in Phnom Penh and Siem Reap continue to push upwards, many investors are quickly being priced out of these first-tier markets. Looking at second-tier cities around the Kingdom, Sihanoukville in particular stands out as an investment destination worth serious consideration.

Named after the King Father and home to the Kingdom’s only deep-water port, Sihanoukville is the capital of the province of the same name and is home to a fast-growing population of nearly 300,000.

Many of Sihanoukville’s residents are there for the port or its associated export-focused manufacturing. The city is Cambodia’s second-largest manufacturing base after Phnom Penh, with most of its output consisting of garments and shoes. Port and manufacturing aside, tourism and retirement are also bringing in throngs of people from around the country and the world who want to enjoy the Cambodian lifestyle near some of the Kingdom’s nicest beaches and islands.

Sihanoukville is composed of four sangkat, or communes, numbered one through four. Unsurprisingly, for residential and small business investment, Sangkat 4 – which has the most developed beachfront area – is presently the most popular location.

Sangkat 4 features the four-kilometre Occheuteal Beach, the western end of which is known as Serendipity Beach and is home to a seemingly endless line of restaurants and bars aimed at the wallets of beachgoers by day and revellers by night.

Nearby, Otres Beaches’ comparatively pristine conditions are beginning to attract more attention.

Sihanoukville Real Estate director Sieng Pharkdey told the Post that the city’s recent rapid growth was likely to continue in the short term due to several key factors.

“We have an international port and very nice natural beaches,” Pharkdey said. “Plus it’s a very safe place to live.” Since 2006 Sihanoukville Real Estate has focused on assisting international investors with property services in the area. Pharkdey said he has many different types of clients.

“Many retirees come here to buy property and live a relaxed life,” he said. “But there are others such as a group of British clients who are engineers. They buy a bare plot, build a unique building on it and sell it off at a high profit. Other people just want to have a bar or restaurant near the beach”

Pharkdey said Russians and Australians are currently the biggest investors in residential and business properties in Sihanoukville, while South Koreans, Japanese, Chinese and Russians were the main investors in industrial properties, typically in Sangkat 1 by the port or in the Sihanoukville Special Economic Zone, just outside the city en route to the local airport. Industrial plots along National Road 4 are $50 per square metre, he said, adding that plots located 200 to 300 metres off the road were typically only $20 per square metre.

Non-industrial land in and around Sihanoukville is also much more affordable than in Phnom Penh. Land prices for businesses near the beach in Sangkat 4 are currently running between $400 and $450 per square metre, whereas residential properties further off the beach are selling for $50 to $70 per square metre.

For foreigners seeking to have full ownership of a condominium in Sihanoukville with strata title, new developments are beginning to come online in Sangkats 2, 3 and 4, with small units priced between $35,000 and $50,000.

For all other foreign property investments, a 51:49 Cambodian-foreign partnership is required, as elsewhere in the Kingdom. But foreigners aren’t the only ones who see opportunity in this sleepy beach city.

Phnom Penh native Leng Samnang, whose family owns Diamond Ocean Resort hotel, just 50 metres from Occheuteal Beach, told the Post that low competition and expected growth in tourism made Sihanoukville a natural choice.

“My father’s cousin has a hotel in Siem Reap, and he says the competition is quite intense. Sihanoukville is not big and developed like Siem Reap, it’s still developing, which is good for entrepreneurs like us.”

Samnang’s family bought the land in 2012 and by the end of the year began construction. Twenty-two of the hotel’s rooms are currently available to guests, while renovation on five floors and 55 more rooms is currently under way.

With no five-star competition yet, Samnang and other hospitality entrepreneurs have a chance to develop before competition intensifies in the coming years.

“Running a hotel is a new enterprise for us, but we like it. Feedback will be important in improving our service.”

Samnang said he and his family were expecting a big jump in tourism in Sihanoukville in 2015. Pharkdey of Sihanoukville Real Estate agreed, saying that tourism this past holiday season was noticeably higher than the year before.

There is obviously much room for growth in Sihanoukville at the moment, but there are many large plots of land near the beach area in Sangkat 4 waiting to be sold. It might be surprising that such large plots of land near the beach are not being snapped up faster. Sihanoukville Real Estate director Pharkdey said that a high level of local optimism toward the property sector is creating a disconnect between asking prices and actual value.

“Prices in some are higher than what they actually should be,” Pharkdey said. “One example is a 30-metre-by-40-metre plot in Sangkat 4 that the owner is selling for $1 million.”

Pharkdey said the excessive price tags on some real estate in the city come from one of two main factors: local confusion over how market prices are determined, and political connections and wealth that enable the landowner to be patient.

Despite these issues, Pharkdey is bullish on Sihanoukville’s property market in the short term, noting that land prices in prime locations rose 30 per cent in 2013.

“Even though the market does have some issues,” Pharkdey said, “anybody who wants to invest in a high-potential market while it’s still quite affordable should seriously consider Sihanoukville.”