Speculation, Stability Seen as Fueling Land Boom
By Kay Kimsong and Michelle Vachon
THE CAMBODIA DAILY
"[The cost of a square meter of land in Phnom Penh] is unbelievable."
—Sung Bonna, CEO, Bonna Realty Group
—Sung Bonna, CEO, Bonna Realty Group
RM Asia Co Ltd had planned to open a large office at a central location in Siem Reap town.
The Phnom Penh-based engineering and trading firm, which is also the Ford automaker's representative in Cambodia, felt that the frantic pace of development in the town called for a local office and showroom.
But the price of land made it impossible, even for that 130-employee firm, said Country Manager Jean-Boris Roux, who is president of the French-Cambodian Chamber of Commerce.
"We were quoted prices for five-star hotels," affordable perhaps for international hotel chains, but not for small or mid-size businesses, he said. RM Asia ended up with a small Siem Reap office at a less-than-ideal location, he said.
Siem Reap, whose tourism potential has led to the construction of thousands of hotel rooms in the space of a few years, is not the only place in Cambodia experiencing a land rush and spiraling property prices.
In Banlung town, the capital of Ratanakkiri province, land around the lake in the center of town has gone up twentyfold, said Pierre-Yves Clais, owner of Terres Rouges lodge. A hectare of land with no road access, about 2 km from town, was purchased for $50 around 2001, sold for about $300 in 2003 and is now worth $2,500, he said. A two-story building on a 4-by-20 meter lot at the town market can fetch $50,000, he said.
In Kep municipality, a square meter of land on the hillside went from $1 in 2001 to $9 in 2001, said Loran Vallier, who operates a farm in Kampot province. A seaside 3,000-square-meter lot worth $10,000 in 2000 sold for $100,000 four years later, he said.
In Kampot, a square meter of riverfront land, located north of the town and zoned as agricultural, cost around $0.70 in 1999, $2 at the end of 2004 and $15 at the end of last year, Vallier said.
In Phnom Penh, "it is unbelievable," said Sung Bonna, CEO of the Bonna Realty Group estate agents. The price of commercial land went from $400 per square meter in 2000 to $650 in 2003, and is now $1,200, he said. A square meter of residential land in the city rose from $250 in 2000 to $400 in 2003, and is now $700, he added.
Prices may decline in 2008, Sung Bonna said. "We have noticed that every election year, political issues create uncertainty and the business environment suffers."
But after the electioneering, prices per square meter should have reached $1,500 for commercial and $850 for residential land, Sung Bonna said.
The land price boom may be fueled by an array of factors, business people and experts said.
Road improvement has caused price increases and a construction boom in Mondolkiri province. Koh Kong province Deputy Governor Em Simyon expects land prices to go up in the province when work on National Road 48 to the Thai border is completed. A square meter of land in Koh Kong town now ranges from $5 to $6, he said.
The prospect of a road from Banlung to the Vietnamese border is playing a role in the land rush in the town.
The anticipated construction of a five-star casino and golf resort on Koh Tonsay, or Rabbit Island, may contribute to the popularity of Kep, which, although it has been a choice seaside area since the 1910s, still has no electricity or other infrastructure.
But the main reason for growing real estate values has been the political stability that the country has known since 1999, Sung Bonna said. In his opinion, the increase in land value is 70percent beneficial to the country.
Others believe that it comes with serious drawbacks.
"This jump [in land prices] is not normal," said a former official of the Phnom Penh Chamber of Commerce who wished to remain anonymous.
When wealthy people from Phnom Penh bid against each other over land purchases, prices escalate, which prevents foreign investors from setting up factories, hotels or agri-businesses on affordable land, he said.
Small and midsize businesses also have difficulty renting, said Roux of RM Asia. A small group of people own a limited number of commercial buildings, so rent is often not negotiable, as some owners prefer to keep a building empty rather than lower prices, he said.
In some areas, future prospects have triggered a heated race by speculators who expect their land to raise in value and leave their properties undeveloped.
Unproductive land slows economic development, said Sung Bonna, who would like to see the government impose a tax on land left underdeveloped for 10 years.
In a growing economy such as Cambodia's, one would expect the value of land to rise because demand increases faster than supply, said John Nelmes, resident representative of the International Monetary Fund.
Demand comes from various factors, including population growth, business expansion and people moving to live on the outskirts of cities, he said.
In Phnom Penh, however, the supply seems to have come before the demand. Thousands of residential housing units are being built in the Phnom Penh area, said Brett Ballard, acting director of the Cambodia Development Resource Institute.
"Is it a sustainable pace?" he asked. Probably not, he added.
"One of the questions ultimately is the degree to which the economy can generate employment at that level of salary" for people to be able to afford those residences, he said.
Without jobs, people will not have the money to make residential construction viable, Ballard said.
Land grabbing in promising areas of the countryside—in some cases leading to violence—has become a regular occurrence in Cambodia. Farmers who lose their land often end up squatters looking for work in cities such as Phnom Penh, Siem Reap and Battambang, said Kimberry Versak, external affairs officer for the World Bank at its Bangkok office.
"In the last few years, Phnom Penh has seen [landless] families living on pavements or non-community areas," she said.
In the Siem Reap area, some farmers sold their land, sometimes for very little to powerful people who are now selling it for 300 times the price they paid, with no plans for the future, said Siem Reap province Governor Sou Phirin.
Some of them were so poor that they had to sell their land just to pay school fees for their children, he said.
"But we have no factory or anything they can do," to earn a living, he said. After spending their money, some of them try to clear state forest land to five on, which is illegal, he said. Land-grabbing by the powerful is also a big issue, he added.
No matter the price, some large international developers consider Siem Reap worth it as they expect development to continue, said Bretton Sciaroni of Sciaroni & Associates law firm, who chairs the International Business Club. They do, however, see Sihanoukville municipality as overpriced due to its lack of infrastructure, he said.
Land value has steadily climbed in Cambodia over the last 15 years, except in 1997 and 1998, he said. It took some time for the economy to recover from the factional fighting of July 1997, observers say.
In a country with few ways to invest funds, the wave of land buying has the advantage of keeping money in the country, they say.
But where some of the enormous sums paid for land come from often remains a mystery.
The Phnom Penh-based engineering and trading firm, which is also the Ford automaker's representative in Cambodia, felt that the frantic pace of development in the town called for a local office and showroom.
But the price of land made it impossible, even for that 130-employee firm, said Country Manager Jean-Boris Roux, who is president of the French-Cambodian Chamber of Commerce.
"We were quoted prices for five-star hotels," affordable perhaps for international hotel chains, but not for small or mid-size businesses, he said. RM Asia ended up with a small Siem Reap office at a less-than-ideal location, he said.
Siem Reap, whose tourism potential has led to the construction of thousands of hotel rooms in the space of a few years, is not the only place in Cambodia experiencing a land rush and spiraling property prices.
In Banlung town, the capital of Ratanakkiri province, land around the lake in the center of town has gone up twentyfold, said Pierre-Yves Clais, owner of Terres Rouges lodge. A hectare of land with no road access, about 2 km from town, was purchased for $50 around 2001, sold for about $300 in 2003 and is now worth $2,500, he said. A two-story building on a 4-by-20 meter lot at the town market can fetch $50,000, he said.
In Kep municipality, a square meter of land on the hillside went from $1 in 2001 to $9 in 2001, said Loran Vallier, who operates a farm in Kampot province. A seaside 3,000-square-meter lot worth $10,000 in 2000 sold for $100,000 four years later, he said.
In Kampot, a square meter of riverfront land, located north of the town and zoned as agricultural, cost around $0.70 in 1999, $2 at the end of 2004 and $15 at the end of last year, Vallier said.
In Phnom Penh, "it is unbelievable," said Sung Bonna, CEO of the Bonna Realty Group estate agents. The price of commercial land went from $400 per square meter in 2000 to $650 in 2003, and is now $1,200, he said. A square meter of residential land in the city rose from $250 in 2000 to $400 in 2003, and is now $700, he added.
Prices may decline in 2008, Sung Bonna said. "We have noticed that every election year, political issues create uncertainty and the business environment suffers."
But after the electioneering, prices per square meter should have reached $1,500 for commercial and $850 for residential land, Sung Bonna said.
The land price boom may be fueled by an array of factors, business people and experts said.
Road improvement has caused price increases and a construction boom in Mondolkiri province. Koh Kong province Deputy Governor Em Simyon expects land prices to go up in the province when work on National Road 48 to the Thai border is completed. A square meter of land in Koh Kong town now ranges from $5 to $6, he said.
The prospect of a road from Banlung to the Vietnamese border is playing a role in the land rush in the town.
The anticipated construction of a five-star casino and golf resort on Koh Tonsay, or Rabbit Island, may contribute to the popularity of Kep, which, although it has been a choice seaside area since the 1910s, still has no electricity or other infrastructure.
But the main reason for growing real estate values has been the political stability that the country has known since 1999, Sung Bonna said. In his opinion, the increase in land value is 70percent beneficial to the country.
Others believe that it comes with serious drawbacks.
"This jump [in land prices] is not normal," said a former official of the Phnom Penh Chamber of Commerce who wished to remain anonymous.
When wealthy people from Phnom Penh bid against each other over land purchases, prices escalate, which prevents foreign investors from setting up factories, hotels or agri-businesses on affordable land, he said.
Small and midsize businesses also have difficulty renting, said Roux of RM Asia. A small group of people own a limited number of commercial buildings, so rent is often not negotiable, as some owners prefer to keep a building empty rather than lower prices, he said.
In some areas, future prospects have triggered a heated race by speculators who expect their land to raise in value and leave their properties undeveloped.
Unproductive land slows economic development, said Sung Bonna, who would like to see the government impose a tax on land left underdeveloped for 10 years.
In a growing economy such as Cambodia's, one would expect the value of land to rise because demand increases faster than supply, said John Nelmes, resident representative of the International Monetary Fund.
Demand comes from various factors, including population growth, business expansion and people moving to live on the outskirts of cities, he said.
In Phnom Penh, however, the supply seems to have come before the demand. Thousands of residential housing units are being built in the Phnom Penh area, said Brett Ballard, acting director of the Cambodia Development Resource Institute.
"Is it a sustainable pace?" he asked. Probably not, he added.
"One of the questions ultimately is the degree to which the economy can generate employment at that level of salary" for people to be able to afford those residences, he said.
Without jobs, people will not have the money to make residential construction viable, Ballard said.
Land grabbing in promising areas of the countryside—in some cases leading to violence—has become a regular occurrence in Cambodia. Farmers who lose their land often end up squatters looking for work in cities such as Phnom Penh, Siem Reap and Battambang, said Kimberry Versak, external affairs officer for the World Bank at its Bangkok office.
"In the last few years, Phnom Penh has seen [landless] families living on pavements or non-community areas," she said.
In the Siem Reap area, some farmers sold their land, sometimes for very little to powerful people who are now selling it for 300 times the price they paid, with no plans for the future, said Siem Reap province Governor Sou Phirin.
Some of them were so poor that they had to sell their land just to pay school fees for their children, he said.
"But we have no factory or anything they can do," to earn a living, he said. After spending their money, some of them try to clear state forest land to five on, which is illegal, he said. Land-grabbing by the powerful is also a big issue, he added.
No matter the price, some large international developers consider Siem Reap worth it as they expect development to continue, said Bretton Sciaroni of Sciaroni & Associates law firm, who chairs the International Business Club. They do, however, see Sihanoukville municipality as overpriced due to its lack of infrastructure, he said.
Land value has steadily climbed in Cambodia over the last 15 years, except in 1997 and 1998, he said. It took some time for the economy to recover from the factional fighting of July 1997, observers say.
In a country with few ways to invest funds, the wave of land buying has the advantage of keeping money in the country, they say.
But where some of the enormous sums paid for land come from often remains a mystery.
1 comment:
I quicly skimmed it and only read the highlighted parts. Recently there are many Cambodians from abroad who invest in land purchases in Cambodia. I will reread this article again to gain a clearer understanding.
Post a Comment