Despite the current focus on the condominium market in Phnom Penh by real estate agencies and media alike, the lesser discussed boom in residential real estate that is changing the face of the city falls in the landed housing market, which encompasses cluster housing developments and the huge borey development sector.
The landed housing supply has risen sharply in the last five years and is still the preferred investment of Khmer home buyers largely unimpressed by the thought of condo living. As 2017 kicks off, landed housing units are beginning to outweigh the market demand, causing many developers to slow the pace of new project launches this year and next.
Just before the festive season, VTrust Appraisal launched a report on the cluster landed housing market, unveiling data on the current and historical supply, demand and sales performance, development and completion status and their predictions on the market moving forward.
To get insights into the state of the landed housing market here in Phnom Penh, Khmer Times sat down with Hoem Seiha, the director of research at VTrust Appraisal, to discuss the topic.
KT: You recently released a housing market report that covers the market views on cluster landed housing in Ruessei Kaev district, one of the 12 districts of the capital. Tell us the main trends in this market, according to your research.
Mr. Seiha: In general, the market trends still hold onto a positive line. However, 2016 saw a year-on-year drop in new launches of cluster landed housing supply if compared with 2015 – but still more than other years. But the good news is that there will be a big increase in housing completion if compared with 2015. This year, many projects with a lot more units will be finished and ready for buyers to move in. However, the result of the overall market slowdown has impeded the speed of construction at some development projects, especially the smaller or nascent ones who tended to rely on presale budgets to cover their construction spending.
KT: You have mentioned that 2016 saw a small decrease in new launches and an increase in completion, so could you give the figure and why it is so compared with other years?
Mr. Seiha: We have collected all market data across the capital, but let us give an account of Ruessei Kaev district as an example. There, the figure of new sale launches of cluster landed housing supply was almost 2,500 units in 2015, but only 1,000 new units were launched during 2016. The supply has slowed because the new entries accumulated on the market inventory over these few years have outpaced the current demand. Therefore, most of developers have been busier selling off their existing inventory rather than challenging themselves by adding new units to the inventory. Nevertheless, in Ruessei Kaev district, about 2,800 new units have been finished this year and 3,300 others are slated to be completed by 2017. While this could be a small case, the scenario may apply across the capital.
KT: You have mentioned that 2017 will see a lot of housing completion within that district and this may apply across the market in Phnom Penh generally. If so, how will the take-up rate be or the speed of people moving to live in the completed houses?
Mr. Seiha: A lot of new families will move in for sure, but the relocation speed is not so fast here. Further, there are also a number of to-be completed housing units still listed on the market inventory. In Ruessei Kaev district, for example, some projects still have their partially-finished units listed on pre-sale inventory, be it 17 percent in general.
KT: Is there any possibility of a pricing drop across the board within the landed housing market here in Phnom Penh?
Mr. Seiha: No sign yet. The general pricing may not increase because of slow market absorption and overwhelming supply, but the price will not drop at the moment through to 2017. However, if the slow market absorption rate still persists until 2018 given the current large volume of supply and rapid completion rate in 2017, some of the weak developers who struggle to finish their units and are underperforming in sales of their completed units will consider selling them off below the market prices to recover their spending.