Recently CBRE CAMBODIA reported that the market supply of Phnom Penh condominiums will increase by 533 per cent from early 2015 by the end of 2018. About 9500 additional units will be available for rent in central and outer Phnom Penh, according to CBRE Cambodia associate director Simon Griffiths. According to a recent report of real estate agency Century21 condominium development increased by 20 per cent annually from 2008 to 2014 with 13 projects successfully completed, which translates to 3,090 available units as of today. With another 17 projects currently underway, the report predicted that by 2018, when many of the current projects are slated for completion, the number will have more then tripled to over 10,000 available units across Phnom Penh.

Although, estimates for future condo supply may slightly differ, clearly one question remains: will demand meet the market supply by 2018 or, in other words, who will inhabit all these condos popping up across the capital?

Seng Bonna, Director of Bonna Realty Group said that foreign investors make up 60 to 70 per cent of condiminioum presales and that these investors are looking to turn a profit as soon as the property becomes tenable. He added that the benefits for investors investing in Cambodia are currently favorable as property prices continue to rise, although he was quick to note that is unwise to predict market stability in the longterm beyond 2015. According to him, the number of condominioums will continue to increase as long as construction growth remains between 5 and 10 per cent after the ASEAN Economic Integration, which many current developers hope will bring in wealthy overseas renters.

“For the ASEAN Economic Integration, it is new for Cambodia. So let’s see how [the market] will be after the integration,” said Bonna.

However, he warned that there needs to be caution accompanying any projected speculation.

“Cambodia will encounter the problem like in Thailand in 1997 if we don’t carefully think about this,” he said referring to the real estate driven Asian financial collapse that saw Thailand’s property prices plummet.

Although there have been no negative signs in the Cambodian real estate market, the crisis in Thailand serves as a model to avoid unnecessary risk, he said, adding that “prevention is a better cure.”

“In other countries, where population is higher, demand will come back in short time. However, Cambodian population is still low, so when it experiences oversupply, it can be a big problem,” he said cautioning that developers shouldn’t increase supply when there are no clear indicators that predict demand from foreign tenants.

Although 2018 is still a ways away when Casa Meridian, The Bridge, The Bay Cambodia, The Riviera, The Olympia City, TK Royal One, Sovann Condo and Hongkong Land will officially come online, Po Eavkong, managing director of Asia Real Estate Cambodia, said that the sector should monitor the influx of investment and level of buyers to make sure supply does not outpace demand.

Unlike Bonna, he predicts that supply will be met by local demand as middle-income earners increase, protecting the market from the dependence on wealthy renters moving to Cambodia from overseas. According to him, the calculated analysis of the cost of living on the outskirts of the city, burdened by travel time and expenses, will encourage renters to move to centralized locations where hospitals, social services and transportation are more readily available especially as the inflow from the provinces continues to increase.

Currently the large condominium supply is a positive point for the property market ahead of the ASEAN economic integration, he said, adding that it presents the opportunity for overseas investors looking to gain a foothold in a community of 600 million.

“I’m still optimistic that Cambodia will have political and economic stability from now until 2018, so it’s not a worry,” he said.

However, will Phnom Penh see an influx of a highly paid foreign professionals from ASEAN within the next three years?

Kevin Britten, managing director of Top Recruitment, doesn’t believe it will. “Of all people we place in jobs only five per cent are foreigners. Most companies have a clear policy of hiring local professionals and I don’t see that changing,” he said and added that the ongoing ASEAN integration had no impact on the labour market for professionals. “The door is already open. [Foreigners] who want to work and live in Cambodia have been doing so for years.”

Anticipated condo supply in central and outer Phnom Penh as of Febuary 2015. CBRE

Moreover, Britten said that the key areas of the Cambodian economy such as agriculture and the garment industry didn’t require foreign professionals to live in the inner city but rather the countryside and the outskirts of Phnom Penh where the garment factories are located.

Simon Griffiths, associate director of CBRE Cambodia, said that in the short- to mid-term, the majority of condominium renters would primarily be foreigners. However, he added, that by 2018, the market will have changed as competition increased and more supply entered the market, thus creating a more beneficial environment for renters.

“This will change of the market status quo. Currently, we are in a developers/owners market, [where] good supply is limited, demand is high, and rents are high. With new condos coming online, renters will have more choice, be more selective and those developments which have not invested in good maintenance, upkeep and are well property managed will suffer,” he said.

Project manager of Overseas Cambodian Investment Corporation (OCIC), Touch Somnang, said he is not worried about OCIC’s projects being affected by a lack of demand as the company has overseas sale agents and many clients from China, Taiwan and Japan.

He added that most of his investors purchased condominium units to rent out or sell. An obvious example he added was the completed Rose Condo where the level of residents was low because some investors were waiting to sell the condo units rather renting them out.

Sear Rithy, the director of World Bridge Land Group, said that expectations that are reliant on an inflow of wealthy renters, can be troubling.

“It can be a crisis if developers only target foreign buyers. For instance, if foreign buyers buy 1000 units to rent, but there are no tenants, what will happen? Those buildings will be deserted,” he said.

However, Griffiths disagrees that foreign buyers and renters are the lynchpin to renting out the growing supply. He explained how the projected number of available units by 2018 “is a small number dwarfed by the number of Cambodians who could pay the rents for serviced apartments being achieved in BKK1 today. The question is do Cambodians want to [rent condos]?”

“Overtime more and more will. I have no doubt about that,” he said.

Mey Kaliyan, senior adviser of Supreme National Economic Council, said the development growth is both good and bad. The good is that property owners are happy to sell their property at a higher price, but the bad is that finding tenants can be difficult. He added that if developments do not go smoothly, the government is worried that it can negatively affect the economy.

“It’s like a game. When property prices increase, buyers run to buy it. However, when [prices] decrease [because there are no tenants], they lose,” he said.

Additional reporting by Sum Manet and Julius Thiemann.