Real estate market conditions are known for being volatile, as has proven the case for Cambodia in 2016. The year started off strong, with property developers continuing the steadfast construction momentum that defined 2015. However, oversupply concerns plagued the latter half of 2016 which forced some to put their foot on the brakes.

For what’s in store for 2017, Post Property spoke to David Van, local managing director of the business consultancy firm Bower Group Asia, to get some insights on some of the challenges and opportunities that could be in store for the local market, especially with the imminent electoral elections causing some stirs within the industry.

2015 and 2016 have been boom years for Cambodian real estate with much foreign investment pouring into the country. Do you foresee this trend continuing in 2017?

It’s no secret that the world is bracing for a rougher ride in 2017 with some stock market crash in the making over the last couple of years, coupled with problematic economic growth in most parts of the world like the US, EU, and China. Hot money that used to be poured in from shadow banking from China has also dried up pretty quick since President Xi Jinping clamped down on that dangerous sector over the last few years. Some existing projects have also been giving much bigger discounts to entice new buyers.

All these are signs pointing to a global economic picture – that is not entirely rosy – expected for 2017, and Cambodia will not escape the impact either.

Is Cambodia’s real estate market still attractive for foreign and local developers, or is the growing issue of oversupply forcing developers to take a back seat for now and reassess?

Cambodia’s real estate return on investment (ROI) averages in the 5 percent to 6 percent range, and for carefully selected prime locations, ROI could climb up to the 8-10 percent range as compared to, say, 2 percent in Singapore. So, from a commercial standpoint, yes it does look attractive, but investors need to do their math and carry out proper due diligence prior to investing.

What about political stability? Many experts believe that Cambodia has political stability which makes it an attractive place for foreign investors eyeing the property market here. Is this something you agree with?

Every pre-electoral cycle would see the Cambodian business environment come to a standstill and a wait-and-see mode, and the forthcoming 2017 commune elections and 2018 general elections shouldn’t be any exception either. If post-electoral days are smooth – without any enduring electoral dispute on results – business will then continue to function as per normal again.

How will next year’s elections change the market dynamics for the real estate sector?

People would normally want to sell off under some pressure during the pre-electoral period, and shrewd investors who do their homework would find opportunities to buy at reasonable and not premium prices. Once the electoral period is over and a new government is in place, [the] market tends to appreciate again. This is [the] usual cycle observed over the last decades.

With residential oversupply concerns in the market in the last-half of 2016, some experts have ignored the positives that can be derived from this changing market condition. What do you believe are some of the advantages of a market that is gearing towards an oversupply?

Oversupply would be more in the high-end condo projects meant primarily for foreign buyers. Locals still do not appreciate the lifestyle in a condo, preferring traditional landed property in the form of link houses or semi-detached houses. However, all developers tend to overlook a huge potential in “affordable housing” priced reasonably for the mass working population. In other countries, governments run public housing to solve accommodation aspects for their citizens but not in Cambodia.

Henceforth, “affordable housing” should be a huge thing to tap into.

This interview has been edited for length and clarity.