A gated community, known locally as borey, in Phnom Penh’s Meanchey district on January 4. Heng Chivoan
The possible lowering of interest rates by major US banks in 2024 spells a bright future for Cambodia’s real estate and construction sectors. The change promises to invigorate the market, boosting buying, selling and renting activities and energising the construction industry beyond 2023’s performance.
In mid-December, CNBC reported that the US Federal Reserve (Fed) announced its decision to leave interest rates unchanged, a move many believe will mark the end of the central bank’s rate hike cycle and pave the way for cuts in the coming year.
The Fed has increased rates 11 times since March 2022 – the fastest pace of tightening since the early 1980s. The surge in rates has increased consumer borrowing costs considerably while inflation remained elevated, placing substantial pressure on many households.
Lower rates to speed real estate recovery
Tang Hour, vice-president of the Cambodian Valuers and Estate Agents Association (CVEA) and director-general of Amatak Property Service Co Ltd, told The Post on January 4 that in late 2023, several major US banks had reportedly decided to lower interest rates on loans.
She said that rate cuts by US banks, commonly seen as the world’s largest source of finance, is certain to have a positive impact on economic growth and the real estate market worldwide, including in Cambodia.
She explained that in the past, due to uncertain world economic growth, financial institutions globally were compelled to raise a series of interest rates and implement stringent lending restrictions, particularly in the real estate and construction sector.
Hour added that in recent years, especially in 2023, financial entities in Cambodia have significantly tightened lending to the sector, posing many challenges for the industry, noting that even small-scale activities have become less active.
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“Those of us in the real estate sector are very pleased and eager to witness some recovery in the market after a nearly four-year lull since the emergence of Covid-19 cases in early 2020,” she said.
“The US, being home to some of the world’s largest financial institutions and banks, means that lowering interest rates [there] will provide opportunities for investors to secure loans and invest more directly in Cambodia,” she added.
Hour mentioned that while interest rates are decreasing in the US, she also hopes to see financial companies in Cambodia start to lower interest rates and release more loans, as well as relax conditions to provide opportunities for investors to begin financing new projects.
“The real estate market in Cambodia in the short term will not be able to grow as much as before 2020; the sector needs more time. The [industry] will gain momentum as global economic growth jumps,” she said.
According to Hour, reducing interest rates and issuing more loans will not only improve the sector but will also aid other industries, from small to medium-sized businesses.
She said the influx of foreign tourists will help boost cash flow in the economy and stimulate the markets, noting that most of the real estate prices in Cambodia today are lower than in 2020.
Real estate, construction recovery optimistic for 2024
Sam Soknoeun, president of the Global Real Estate Association and CEO of Sam SN Realty, observed that 2023 was a period of muted activity in the Cambodian real estate market.
However, he anticipates a modest improvement in the sector for 2024.
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He attributes this to the government and the private sector striving to promote and market Cambodia, thus attracting more national and international investors.
Soknoeun said that when investment increases, there is inherently a need for locations and buildings, which will gradually aid the recovery of the market.
“The real estate market in 2024 will be slightly better than in 2023 through the growth of new investments. Real estate and construction always take longer than other sectors to recover,” he said.
He opined that the reduction of interest rates by US banks has had little effect on the Cambodian property market. He believes that activities within the country itself are of greater importance.
Preah Sihanouk provincial deputy governor Long Dimanche said both the government and the provincial authorities are prepared to welcome tourists and national and international financers looking to invest in the coastal region.
He noted that for 2024, the provincial authorities have prepared numerous incentive packages for backers wishing to expand or open new businesses.
“In 2024, we hope to receive more tourists and investors. Many problems, especially in the construction and real estate sectors, will be resolved,” he added.
