Despite the upcoming national elections, land prices in Sihanoukville keep rising as infrastructural developments and major investment announcements buoy investors and local seller’s confidence.
However, some market insiders believe these prices are moving faster than demand.
In an interview with local media, Oknah Cheng Kheng, the CEO of Cambodia Properties Limited (CPL), said: “Land prices in Sihanoukville are climbing because of the non-stop flow of investors, especially Chinese investors.”
The Sihanoukville Special Economic Zone (SSEZ) is an ideal example of Chinese capital reshaping the coastal region. According to CBRE Cambodia’s Special Report on Sihanoukville, “it is estimated that at its completion, the SSEZ will be home to over 300 factories employing 80,000-100,000 people.”
The same report also indicates four new major condominium developments that will contribute to the market’s residential supply as soon as 2018 hits.
Echoing Mr Cheng’s view, Cambodian Valuers and Estate Agents Association (CVEA) president Kim Heang told local media that this year was a peculiar case, with trade in Sihanoukville property still active despite the upcoming national election. This is contrary to the past when the property trade came to a standstill in the months before elections.
Yet some market insiders suggest that high land prices in Sihanoukville, in particular around the beach areas, are being pushed up by unfounded speculation.
According to Brad King, the Managing Director at Cambodia Real Estate, a Kampong Som-based brokerage, landholders in central Sihanoukville see major development happening around them and assume their land has also now doubled in price.
“But usually it’s not the case,” said Mr. King, “with their land being inferior to post development land as it lacks basic infrastructure such as water and electricity connectivity.”
The especially high land prices apply to beach areas from Hawaii Beach all the way to Otres 3, said Mr. King, with prices anywhere from $1,000 per square metre up to $2,500 per square metre. According to Mr. King, even land only two streets back from the beach is being priced at $300 to $750 per square metre. The Sihanoukville foothills with some coastal views start at $80 per square metre and go as high as $750 per square metre for an unobstructed sea view.
“With the majority of beach plots being more than one hectare, the entry level price on the beach is $10,000,000 for 10,000 square metres,” he said.
“Other than this, you can find the odd plot under one hectare, but the prices are usually above the average. For example, there is a one 5,000 square metre plot left on Otres Beach for $1,250 per square metre.”
Den Sakal, the CEO of Universal Real Estate, said a Chinese investor had bought a considerable section of Otres Beach land shortly after Khmer New Year. Because of this investment, land prices around the project plot rose very quickly.
According to Mr. Den, land prices on the Otres Beach front have risen as high as $1,250 or $1,300 per square metre in some cases, buoyed by the confidence of a major Chinese development underway.
However, Mr. Den noted that land transactions in the Otres area had not increased alongside the price increases. The rising prices are driven by local landowner speculation and it is unclear what highs the sale prices will reach, he said.
Mr. Den suggested that this type of speculation will create a bubble in the market only suitable for Chinese buyers willing to pay exorbitant prices – and will freeze out other investors interested in the area, both local and international.
There are three plots on the main road to Sokha Beach that are prime for development and still below the current market prices, noted Mr. King. These plots range from $550 to $750 a square metre, ranging in size from 3,800 to 10,000 square metres, only minutes from Sokha Beach.
The reason these plots are priced at “last year’s prices” is due to the owners living abroad and not following this year’s price increases, said Mr King.
“Beach land prices in Sihanoukville should not be as high as similar destinations in Thailand and the Philippines yet, as there is no supporting infrastructure in place to warrant those prices,” said Mr King.
And while CBRE mentions in their report that “the downtown area provides many services including international banking, medical, post office, business services and shopping”, Mr King said “the roads in Sihanoukville are in bad shape, there is no major shopping centre, no quality entertainment, the hospitals are underfunded and not up to an international standard that gives investors’ confidence, and although the airport is becoming international, it is far from happening yet”.
Mr. King added “the prices of land suitable for the small investor or retiree have slowed the growth rate of Sihanoukville as it is out of reach to 90 percent of the western foreigners looking to retire or buy a holiday home there”.
“This means the land on offer to the market is either too big for the average buyer and/or too expensive.
“The whole market is in a development cycle and hopefully some of the major landowners will see the long-term benefits of developing mid-range to high-end villas and apartments which will give Sihanoukville long-term sustainability in all seasons,” he added.
For smaller investors Mr. King recommended buying established houses or established apartments built prior to these high land prices becoming the norm.
If you want land, “look into the foothills or look at smaller blocks along back streets. Here there are plots of land for under $80,000 and below that are perfect for villas and/or apartments”, he said.
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