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Boom to bust in Cambodia [-Uh oh! Look like Dr Hun Xen and his CPP economists missed that one]

Mar 7, 2009
By Tim Sturrock
Asia Times (Hong Kong)

PHNOM PENH - Potential buyers at the entrance to the Grand Phnom Penh International City pass through a 29-meter-high, 42-meter-wide arched gateway topped with 18 life-size bronze stallions, only to arrive at a moonscape of bulldozed earth and ditches.

When the project was unveiled in 2006, it proposed 4,000 residential villas and apartments at a projected cost of US$500 million. The joint Cambodian and Indonesian developers' promotional material promised the convenience of a shopping center and an international school surrounded by the beauty of ponds and manicured lawns, as well as a golf course and driving range.

Of the 4,000 units in the original plans, only 21 villas will be ready by April, followed by around 100 more units by the end of the year, Grand Phnom Penh marketing director Nhem Sothea said. Only 138 units, including 44 shops, have so far been purchased.

The first phase was to include 500 units, and that goal is unlikely to be met, Nhem Sothea said. Most sales so far, with buyers paying $99,000 for 42-square-meter terraced houses or $138,000 for 92-square-meter townhouses, occurred before the global economic crisis hit late last year. No one has yet purchased any of the properties billed at over $750,000.

"The market is really bad," Nhem Sothea said at his on-site sales office. "The market is not really up to expectation. The future of the project depends on demand."

Grand Phnom Penh is just one of a half-dozen so-called "satellite cities" that property developers once promised would serve as suburban getaways for Phnom Penh's growing affluent and expatriate populations. But those plans, worth a combined $3.5 billion, were conjured when Cambodia's property market was booming; developers now say they may scale back or delay indefinitely their ambitions.

Banks have already restricted loans for real estate as economic growth has slowed and as property prices have dropped - in the city center by about 25% since last July, and in the outskirts by 30%. Cambodia's gross domestic product growth is projected to fall below 5% this year, a sharp decline from the heady double-digit expansion the economy averaged from 2004 to 2007.

The global crisis is taking a toll on Cambodia's main economic growth engines: garments, tourism and property. There were some indications of a property bubble even before the global economic and financial collapse. As local property prices soared, the National Bank of Cambodia (NBC) in mid-2008 restricted access to loans by doubling banks' foreign currency reserve requirement to 16% from 8%. The NBC also capped the amount of real estate loans banks could make at 15% of their portfolios.

The central bank in February repealed those restrictions in response to a rapid decline in the property market. An International Monetary Fund report last month said Cambodian banks and the NBC needed to improve management of risks and banking supervision to avoid failing loans, which it said appeared to be rising.

Bulls to bears

While developers insist that their projects remain viable and have secure financing, the assertions come against plunging demand and a short supply of lending to potential buyers. Sung Bonna, president of Bonna Realty, said that speculators a year ago were buying up real estate with hopes to sell it later to developers for a profit. "Now even in general property in the city center there is not so much demand."

He predicted that at the most, only 30% of satellite city units could be purchased by Cambodians and urged the government to make Cambodian real estate more appealing to overseas buyers. Foreigners are at present barred from buying condominium units in Cambodia.

Indications of a slowdown are ubiquitous. Along the city's Tonle Bassac riverside, billboards for the satellite city Diamond Island City, planned for nearby Koh Pich island, show a so-far nonexistent metropolis that looks as if it were rendered by utopian cubists or futurists.

When the Overseas Cambodia Investment Corporation (OCIC) unveiled Diamond Island City in 2006, during the days of Cambodia's go-go property boom, the plan included a hospital, restaurants, a shopping center, park and series of homes, some with personal swimming pools, that ranged in price from $280,000 to $1 million.

Investment in the Koh Pich project could drop by one-third to $800 million from $1.2 billion, said Touch Samnang, the project's manager and architect. That would likely entail trimming the number of units from 15,000 to 12,000, depending on demand, which he said has been affected by the global financial crisis. OCIC is still building bridges to the island, yet no units are under construction. Touch Samnang admitted pre-sales have not gone as well as anticipated.

Of the 168 units planned in the project's $28 million phase one known as "Elite Town", buyers have purchased only 40% after more than a month of sales, he said. That's a huge drop over the past few years, when units at other OCIC projects sold out in weeks. Elite Town will be delayed at least six months or until mid-2010, and the entire project could be finished in mid-2017, about 18 months behind schedule, he said.

Asia is only too familiar with the damage that can be wrought by a property collapse, seen in Thailand, South Korea and Indonesia during the 1997-98 Asian financial crisis. Stephen Higgins, chief executive officer at ANZ Royal Bank, the country's largest, said he did not anticipate the same problems that Bangkok and other Asian cities faced in 1997 when hundreds of buildings were left half-completed when financing dried up.

"Where Cambodia is fortunate is that a lot of these project haven't been constructed," he said in an interview, nor did most property-owners in Cambodia have mortgages so the market has some residual strength.

The problem now is that so many projects attempted to take advantage of the property boom at once. Higgins says the financial crisis has acted as a correction in some ways, possibly stopping all the projects from happening at once and flooding the market. "It will take a bit longer but that is not necessarily a bad thing," he said.

In northern Phnom Penh, the cranes are still swinging at Camko City, a $2 billion, 120-hectare satellite project that originally boasted plans for 6,000 units. The new economic situation may force a rethink, according to Kheng Ser, a marketing counselor for South Korean project developer World City.

He claims sales at Camko have been better than at rival developments, with 80% of the city's first phase 1,009 units of apartments, small villas and houses sold at prices of up to $330,000. According to Kheng Ser, the villas and houses will be completed this month and the tower blocks by the end of the year. However, designs are not complete on Camko's much larger phases two and three, he said.

Even the country's best-known tycoons are scaling back their property development plans. Sok Kong, president of Cambodian conglomerate Sokimex, said that he would delay plans on a 218-hectare satellite city to be called Beong Chhouk Township, though he said a land dispute was the main reason for the delay.

"We drew the master [plan] a while ago," he said by telephone. "I have to delay three or four years." He said he wants to focus his financial resources on his $1 billion Bokor Mountain development in Kampot and another hotel project on Phnom Penh's Chroy Changva peninsula.

Hard-hit Koreans

Meanwhile, South Korean-financed projects have faced some of the heaviest cutbacks. The global economic crisis, which has hit South Korea particularly hard, has leveled original plans for a proposed $300 million, 953-unit Pharos Mekong satellite city on five hectares of the Chroy Changva peninsula, according to an e-mail from Kheang Piv, a marketing manager for the Korean-owned project developer BK Asia Pacific.

He wrote that after the global financial crisis began, Korean finance dried up and the company could not get the money it needed to move forward. The company planned to start construction in December, but pulled back in November, Kheang Piv said. "It is not the right time for us to sell such kind of luxurious, high-end apartments. Eventually, we decided to keep our project on hold till the desirable time," he wrote.

The International Finance Complex is perhaps the largest South Korean-backed real estate project in Cambodia to feel the financial pinch. Korean firm GS Construction & Engineering broke ground in June on the IFC's seven skyscraper mixed-use complex near the Tonle Bassac. But the entire development has now been postponed until at least 2010, and then only three of the original planned seven buildings will be built. The project, originally projected to cost $1 billion, has been winnowed down to around $500 million.

In September, Korean firm Booyoung Company shelved plans for a development on a more-than-100-hectare expanse of land near Russian Boulevard because of uncertainty in the market, according to Jong-seon Choi, general manager for Booyoung in Phnom Penh. "We stopped because of the financial crisis," he said. "It's very uncertain."

The economic situation has also stifled less ambitious projects. At the proposed 500-unit, five-hectare Dream Town near Phnom Penh International Airport, only 30 units have been sold and its 2012 completion date will likely not be met, said Kong Vannsophy, manager of the project's developer, Cambodia Priority Property Investment.

"If we rush and no people buy, we lose money," he said. "A lot of other projects are facing these conditions."

ANZ Royal Bank's Higgins said the risks have grown regarding demand for Phnom Penh's satellite cities because many are in remote areas. "You would have to expect that the downturn in the property market will have some impact in those projects," he said. "By definition you are setting up in a new area, whereas if you set up in Phnom Penh you know there is going to be demand for it."

He said ANZ will not likely loan money to borrowers seeking to purchase property in satellite city projects. "It's difficult to say. We should not have a big appetite for it. We want to see something built."

Tim Sturrock is a Phnom Penh-based journalist. He may be reached at timsturrock@gmail.com

Consumers trade fashion for practicality: vendors [-Welcome to the real economic world!]

Ry Srei Ya, 17, talks on her mobile phone on the Phnom Penh riverside this week. (Photo by: Heng Chivoan)

Friday, 12 December 2008
Written by Sam Rith
The Phnom Penh Post

Local retailers say they are feeling the effects of the global economic crisis as traditionally robust sales of luxury mobile phones, vehicles decline

AS OFFICIALS and international analysts scramble to assess the local impact of the global economic crisis, retailers in Phnom Penh say sales of high-end mobile phones, automobiles and motorbikes have plummeted as the capital's middle classes tighten their belts.

Luxury mobile phone sales - a largely youth-driven economic indicator - have dropped substantially as more people do without or settle for cheaper models.

"This year's sales at my shop have dropped 70 percent compared to last year," said Heng Vantha, owner of Asia Phone Shop in Phnom Penh.

Average sales used to be about 15 phones per day, she said. Now she moves only about two or three per day - mainly inexpensive models.

"Last year, customers were buying phones that cost US$100 and up. This year, they are buying models that cost $30 or less," she said.

Automobile sales have also proven vulnerable to the global economic slide, as more and more professionals trade in their luxury cars for cheaper modes of transport.

Real estate agent Chea Chansangha, 27, used to drive a late-model car and routinely spent a small fortune on the latest mobile phone technology. Falling land sales, however, have forced him to forgo his accustomed luxuries.

"I recently sold my $300 mobile phone and bought a cheaper one instead."

"Now, I'm almost broke. I don't have money for new phones or cars to look trendy and fashionable, as I did last year," he said.

"I've not been able to sell any plots of land [this year]. Last year ... I made a lot of profit, but now the land market is quiet," he added.

Kong Nuon, president of Cambodia's only Toyota distributor, TTHK Co Ltd, said sales of Toyota vehicles had fallen almost 50 percent since May.

A drop in land sales has dried up cash streams that in previous years were swollen by the property boom, realtors say, adding that price fluctuations have made consumers much more conservative in their spending - a trend that one property expert says will take time to reverse.

"It will take about one or two years for land prices to return to normal," said Sung Bonna, head of leading property firm Bonna Realty.

In the meantime, some consumers have begun to look for ways to cut their losses by sacrificing flash for practicality.

"I recently sold my $300 mobile phone and bought a cheaper one instead," real estate agent Chea Chansangha said, adding that he gave up his car in favour of a motorbike.

Nom Leanghim, owner of the Blue Heart Phone Shop in Kandal market, said he sees signs of growing economic hardship every day.

"Young people do not have money now. Some of them have exchanged their expensive phones for cheaper models," he said, adding that many have given them up altogether.

"I am now buying back more mobile phones from young people than I am selling to them," he said.

The World Bank on Wednesday predicted economic growth of only 4.9 percent in Cambodia in 2009, down from 6.7 percent projected this year.

New Car Boom Slows Amid Downturn

By Ros Sothea, VOA Khmer
Original report from Phnom Penh
11 December 2008

Despite Cambodia’s relatively small population, a number of international car companies are competing with each other for business, even as the global economic downturn is causing some woe.

There are more than 10 international car companies in the country, including Germany’s Mercedes, South Korea’s Sangyong and Japan’s Mitsubishi, Nissan, Suzuki and Toyota.

Kong Noun, president of TTHK, which imports Toyota brands, said he sold more than 1,000 vehicles in 2008, twice as many as the year before.

“Toyota is popular among costumers in Cambodia,” he said. “We are proud of competition, so I can say I have choosen the right partner.”

Cambodia has about 14 million people, but a third of them live on less than a dollar a day. A small number have shown keen interest in personal vehicles, but distributors remain optimistic in the market.

“Although Cambodia is a poor country, those who can afford to buy a car are not poor, and they wish to buy the most modern ones,” said Seng Veng, president of Ford in Cambodia.

Cambodia imported 20,000 new vehicles this year, most of them for wealthy businessmen or government officials. Most people still purchase cheaper used cars, a trend that can limit the new-car market but also might change.

“Cambodia is still a growing market, I guess,” said Paul Freer, vice president of Huot Traco, which imports Sangyong. “You will see people start using a new car rather that the second-hand.”

Companies say they are looking for that long-term growth.

“When we decide to come here, we are not looking for a short-term business, but a long-term opportunity,” said Michio Nishihara, general manager of Cambodia’s Mitsubishi Corp. representative office.

The new car market provided a good opportunity, economists said, but companies won’t be able to avoid the fallout from the global economic downturn.

Hundreds of new, modern cars now sit quietly in showrooms and warehouses across Phnom Penh, a much different scene from the middle of the year, when customers from across the country were seeking new cars.

In the wake of the shrunken global economy, Cambodia’s car dealerships have been competing through discounts, offers of free motorcycles, lucky draws and free gasoline.

Kong Noun said his sales had fallen 50 percent since May, but particularly in October and November.

“So now we have new ideas on how to sell our cars,” he said.

Seng Veng said the slowdown had cost his company $2 million.

“What we will have to do is just simply start slowing down the import of cars,” Freer said. “If we were importing 50 a month, it will reduce to five a month.”

Spending down as land sales fall

Mel Trea's spending days are temporarily over. (Photo by: Heng Chivoan)

Wednesday, 10 December 2008
Written by Soeun Say
The Phnom Penh Post

Businesses feeling crunch as fewer land sales mean fewer new rich with money to burn

THE end of Cambodia's property boom is increasingly being being felt across the economy as a downturn in land sales means fewer newly-rich Cambodians hit the capital with money to spend.

Sam An, 43, who runs a private automobile dealership on Phnom Penh's Monivong Boulevard, said his sales have declined by up to 50 percent over the last six months from a peak during the building boom of 2006, 2007 and the early part of 2008.

"Many of our buyers made a lot of money from selling land and came to buy cars here," he said. "Now they are so quiet."

Sok Narin, 28, said he used to make a handsome profit from selling Suzuki motorbikes from his private dealership in 7 Makara district to people arriving from the provinces with cash in hand.

"At this time last year I sold between four and five motorbikes per day, but now my business is very quiet," he said. "I think that this is because the property market is not good."

Cambodia's sole Toyota distributor, TTHK Co Ltd, told the Post last month that it has sold only 1,200 vehicles this year, well short of the 2,000 previously anticipated, after sales plummeted almost 50 percent since May.

RM Asia Co Ltd, the country's second-largest automobile importer, said sales of Ford vehicles have declined about 10 percent within the last few months.

Va Teang, 35, who owns a gold shop at Pochentong Market in Phnom Penh, said her income has dropped 50 percent because of the real estate market slowdown.

Mel Trea, 72, a farmer-turned-land speculator from Prakar village in the outskirts of Phnom Penh, said the land boom had made him rich over the past five years.

"I never thought that I would have a great chance like this," he said.

"I earned a lot of money from land I sold during 2006 and 2007 when the land was fetching very high prices. If I had bought land for $1,000 per hectare I sold it at $10,000 per hectare; if I bought at $10,000 I sold at $100,000."

With the proceeds, he built a villa for his family and bought cars and motorcycles. With few buyers around, his wealth is locked up in his remaining land bank and his spending money has dried up.

"Now, the property market is very quiet," he said. "It's not like the last few years when I was very busy speculating."

Kang Chandararot, president of the Cambodia Institute of Development Study, said it was inevitable that the slowdown in real estate sales would be felt throughout the economy.

"The world economic crisis has already affected the real estate market in Cambodia," he said. "If the real estate market collapses, it can make life difficult for other people doing businesses in Cambodia, especially car and motorbike sellers."

Ngy Tayi, undersecretary of state at the Ministry of Economy and Finance said the government was considering how it could intervene to boost the sector.

"I can't give you an answer as to what we will do, but I can say the government is discussing the issue and considering helping them in the near future," he said.

Local Toyota sales down almost 50pc as crisis hits Cambodia

Thursday, 20 November 2008
Written by Nguon Sovan and Hor Hab
The Phnom Penh Post

10% cut in outlet’s expenses
Cambodia's sole Toyota distributor says it will not layoff staff but will cut expenses by a tenth after selling only 1,200 vehicles so far this – well short of the 2,000 previously anticipated.

More sales drops expected in coming year as a worsening economy keeps buyers from opening up their wallets for new cars

SALES of Toyota vehicles, among the most popular in Cambodia, have plummeted almost 50 percent since May, according to Kong Nuon, president of Cambodia's only Toyota distributor TTHK Co Ltd.

"The real estate recession is the main cause for the sales decline because people are not earning extra cash from land sales," he said Monday. "Demand for cars has declined a lot."

He said Toyota had hoped to sell about 2,000 cars this year, but has achieved sales of only 1,200 so far.

He said he expected next year's sales to decline by another 20 to 30 percent.

Despite the slump, the company expects to be able to withstand the tough economic climate, he said.

"We ‘don't plan to lay off our staff, but we will cut expenses by about 10 percent," Kong Nuon said.

Ngorn Saing, deputy general manager of RM Asia Co Ltd, the second largest automobile importer, said Tuesday that sales of Ford brand cars have declined about 10 percent within the last few months.

"I think it is hard to say how bad the effect will be. Our sales normally fluctuate, so we will have to wait to see how bad we will be hit," Ngorn Saing said.

"We have seen a 10 percent decline in our car sales over these last few months resulting from the recession in the land markets in Cambodia because some of our customers are from the provinces," said Ngorn Saing.

Ngorn Saing said the company expected to sell 500 Ford cars in 2008, but has cut its forecast to 450. Despite the slower economy, he said his company hopes to sell 600 Ford vehicles next year.

Ngorn Saing estimates that annual automobile demand in Cambodia stands at about 2,500 for new cars and 40,000 for secondhand cars.

Chan Sophal, president of the Cambodia Economic Association, said Tuesday the decline in automobile sales is mainly due to the slow real estate market.

"In the past, the auto demand has been high because people had money from selling their land and from speculation, but now the land market is in crisis.

"People who bought can't sell it and land speculators have lost everything, so some of the first things they cut back on are new vehicle purchases," he added.

He said that it is hard to predict when the sales will recover. "It could be six months, one year or longer - depending on whether the global financial crisis ends."

Global declines

The problems in Cambodia's auto market are being seen throughout the world, with car companies scrambling to adjust to the recession.

In the US, Toyota recently announced its first sales drop in 13 years and a Christmas-New Year closure at its US and Canadian plants will be extended by two days, spokesman Mike Goss said in an interview Tuesday with Bloomberg.

Toyota cut its annual profit forecasts by more than 50 percent.

Ford reported a 30 percent drop in car and light-truck sales from a year earlier, and Toyota's declined 23 percent.

When Will the Land and Building Bubble Burst?

Monday, January 21, 2008
Op-Ed by KJE
Originally Posted at http://www.about-cambodia.blogspot.com

Just recently another South Korean company unveiled plans to build another sky-scraper, and another satellite city both in Phnom Penh, and one in Sihanoukville, complete with shopping malls and full amenities - all with the benign approval from the Prime Minister himself, who has been known to boast with some pride that real estate prices are now even higher in Phnom Penh than in Hong Kong. Can Cambodia be compared to Hong Kong? After all, Hong Kong has been a vibrant economy for a long time with a lot of long-grown wealth dating back to the time of the Tai Pans, and land there is at a premium due to its geographical location and its overpopulation.

Cambodia has seen a surge in land prices and an unbelievable building boom over especially the last two years. Quite a few people became rich overnight and continued to fuel that craze. To pinpoint the origin and causes for this involves a little bit of guessing but with some insight into economics it seems like it all began with the development of the garment processing industry. Cambodia was identified as another cheap-labor country by Taiwanese and South Korean garment manufacturers, later complemented by Chinese companies. They flocked to Cambodia to build their garment factories and needed large tracts of land. At the beginning some of these factories were built right in Phnom Penh itself. Later they moved to the outskirts and nearby towns, such as Kompong Speu.

Initially, they mostly rented the land, which was then replaced by leaseholds concluded with the government or even private landowners. So far foreigners or foreign companies are not allowed to own land in Cambodia. Eventually, they circumvented this regulation by using Cambodian nationals as shareholders who would hold 51% of the shares. This way the company could buy and own land. By giving the Cambodian shareholders non-voting stock, foreigners owned the land de-facto. Why buy land in the first place and go to all this trouble? Land was still cheap. It could be bought for as little as $1 or $2 per sqm. Prices had only one way to go - up. Even if the factory wouldn’t survive, one could still fall back on the land.

Cash-strapped Cambodian landowners readily sold their land to these outside investors, got smart and bought another piece of land to sell. More and more people with a little money got involved in the speculative craze. (This also led to infamous land grabbing by powerful people.)

Anyway, this is most likely how the cycle started, and it is still going on to this day. Basically, it is the fundamental economic law of supply and demand. In a healthy economy the minute demand levels off prices start to stagnate and if there is an oversupply prices will start falling.

The problems start when speculators sell to other speculators exclusively, and not to end-users. This seems to be the case in Cambodia today. And this is not limited to just land. The building boom is just as affected by this ‘virus’. First it was only a few, but word spread quickly, and people came in droves from overseas, especially South Korea. Then Cambodians, including overseas Khmer, who had made money played the game with each other – buying and selling land at a pace never seen before in Cambodia. But condos and town houses are equally bought with the expectation of rising prices.

Another problem is that Cambodia is not a developed country with a healthy economy built on the foundations of a sound financial and fiscal structure. This speculation and building boom bypasses the general population altogether. Out of 15 million how many participate in this boom and how many benefit from it? There is no concrete data available but I would think perhaps between 50,000 and 100,000. After all, this is a country where more than 40% live on less than $2 a day. Wealth is concentrated in a few hands, and the majority of the wealthy people live in Phnom Penh and Seam Reap.

Cambodia is not the first, and won’t be the last, to go through such a real estate boom - and resultant bust. Europe has had it at various times, so has the U. S., and its next-door neighbor Thailand saw its real estate boom/bust in the late 90s. The latest bust in the U. S. is now having worldwide repercussions, which is the result of unparalleled real estate speculation fueled by easy money through sub-prime mortgage lending. All the signs point to a recession in the U. S. dragging down other markets with it. Just this week the European and Asian stock markets dropped by more than 7% in one day, more than at any time in 6 years, on the fear of a rippling effect on Asian economies. Experts say the axiom, ‘When the U. S. sneezes, Asia will catch cold.’ still applies.

It will reach Cambodia sooner rather than later. The U. S. is the primary market for its garments. In a recession U. S. companies will buy less. Money will be tighter and the psychological effect will have its impact on the real estate market in Cambodia as well. Europe won’t be able to make up for the losses since there is already talk of a leveling-off of their economies as well.

A look at the vast number of construction sites and at land that is being prepared for construction is more proof that the whole thing is completely out of balance.

Projects are under way, like Camko City, that in its sheer size and level of luxury seem to be built for another country. Camko City is not the only one. There is a multitude of others. Phnom Penh is practically one huge construction site. The above-mentioned Korean project is another case in point. It appears that Koreans do the majority of the construction, and the majority of the land speculation is now in the hands of Cambodians. A brief count of ongoing construction projects arrived at 50,000 units. Considering the sites being prepared, another 150,000 – 200,000 units are in various stages of planning or construction. This extends not only to the city itself but has reached the suburbs and outskirts as far away as 50 km from the center.

Land prices have reached exorbitant amounts, ranging from $100 per sqm in New Phnom Penh, a satellite city near the airport, to $8,000 per sqm in the center of Phnom Penh or along the riverside. Profits are equally exorbitant, or outright obscene. One sqm in New Phnom Penh, for example, a year ago cost about $30, now it is $120. Just the announcement of the building of a bridge across the Tonle Sap River 50 km from the city catapulted land prices in that area from $5 to $50, and now to more than $100 per sqm.

Town or row houses, so-called Cambodian flats, cost between $40,000 and $250,000 depending on location. (Some are also being built just like Western style town houses.) Single-family homes or villas can easily fetch a few million dollars. This boom seems to have left the realm of reality, it has reached what Alan Greenspan called ‘exuberant’ proportions. He had referred to the Internet bubble, but this phrase is easily applicable to this bubble in Cambodia.

A look at the simple and basic demographics of Phnom Penh underlines this assumption. There are about 1.5 million people living within city limits. 500,000 of those live at or below the poverty level, sometimes in simple cardboard or wooden shacks in slums. An average family has 4 members, that is, the remaining 1.0 million people constitute 250,000 households. Various estimates put the number of families with available cash of more than $100,000 at 50% (though I believe this number to be exaggerated), which would be 125,000. These would be able afford to buy one of those luxury condos or town houses. All of these more affluent families do own a town house, condo or other real estate property for their own use already. They would most likely buy these units to rent out or to re-sell.

Who and where are the buyers? Certainly it will not be the rural population, the 40% unemployed, or the slum dwellers. One segment is young people, the sons and daughters of those wealthy parents perhaps, that receive them as a wedding present. Another segment is the newly rich from all this speculation that put all their eggs in one basket and came out a winner and move upward in their housing needs; or others who made some money in a business venture.

Then you have the foreigners, a not insignificant factor. But will all these add up to a base to sustain that hyper-boom in construction? Even given that the city population will become more affluent in the coming years, this will be a somewhat slower process, most likely spanning a period of up to 20 years. So as a consequence, the surplus of construction can conservatively be estimated at 150,000 to 200,000 units after 2 to 3 years, if that boom continues unabated.

However, eventually, builders will find out, as others in different markets before them have, that supply outstrips demand. This will lead to a leveling-off of prices and finally, once the full scope of the problem has been recognized, to rapidly falling prices of both land and houses. It is a safe bet that this would happen in late 2008 or early 2009, most likely sooner if the fall-out from the impending recession makes itself felt in Cambodia in about 3 to 4 months. The real estate market will simply collapse. In parts of the U. S. one could find the exact same characteristics and symptoms. And sure enough, the bottom eventually fell out. There is no basis for a school of thought that this will not happen in Cambodia. There are no factors pointing to and showing that a poor country like Cambodia will be spared a crash caused by hyper-speculation such as the current one. When speculators sell to speculators a boom in that industry will lead to a bust as sure as night follows day. The question is not if but when.