China investors flock to capital
TO SELL real estate in Cambodia, agents are brushing up on their Mandarin.
Across this traditionally low-rise Cambodian capital, a building boom is becoming more noticeable as it pushes higher into the sky, and its largest projects are often geared toward Chinese investors, who have only recently taken interest in the nation’s real estate market.
Chinese investors are flocking to Phnom Penh, which had primarily been an investment destination for Southeast Asians, Taiwanese, Japanese, South Koreans and some Westerners. For many of the capital’s largest projects, Chinese are now viewed as the target market.
“Hist or i c a l l y, Chinese investment in Cambodia has mainly been in infrastructure,” Ross Wheble, the country manager for Cambodia for the real estate
consultant Knight Frank, said in an email. “It is only within the past 18 months that we have started to see the entry of Chinese developers and individual investors.”
This year is going to be a big one in terms of high-end residential property coming on line, Wheble said. In 2017, 3,488 high-end residential units were added to the existing supply in Phnom Penh, he said, adding, “We forecast an additional 15,688 units to complete in 2018.”
One of the largest companies vying for Chinese investors is the Prince Real Estate Group.
In the city’s central district of Chamkarmon, across the street from Cambodia’s National Assembly and the Australian Embassy, statues of Minions characters stand outside a showroom for Prince Real Estate. A large sign, in Chinese and Khmer, advertises luxury condominiums ranging from 23 to 175 square metres (or about 248-1,880 square feet) with an expected 12 percent annual return on investment and monthly payment plans from $386.
Next to the embassy, a competitor’s almost-completed project called the Bridge – Cambodia’s tallest and largest residential development – looms large.
Prince Real Estate has multiple projects in Phnom Penh’s centre. Its 37-storey Prince Central Plaza, with more than 1,000 condominium units, is scheduled for completion in May. The 27-storey twin towers of Prince Modern Plaza are set to be finished one year later. It owns one completed project, Diamond 1, on Diamond Island, a 1.5-kilometre-long parcel of land adjacent to the city’s only casino that is buzzing with real estate projects aimed at Chinese investors and affluent Cambodians.
Cambodia offers rapid economic growth, a young population and good returns on investment, but there are other reasons that the Phnom Penh property market appeals to Chinese investors, including China’s mounting debt.
“Chinese businessmen are acutely aware that the country has a chronic debt problem, and it’s anyone’s guess in a place as opaque as China when that bubble will explode,” said George McLeod, a political risk consultant based in Bangkok. “Businessmen with wealth in excess of a few million dollars are scrambling to squirrel cash outside of China’s borders and the reach of its unpredictable authorities.”
Additionally, Cambodia is primarily a cash economy, with the United States dollar accounting for the vast majority of money in circulation, which creates opportunities for money laundering.
“Cambodia’s banks have lax internal controls and policies around antimoney laundering and know-yourclient compliance, making them wide open to serve as vehicles to launder cash from criminals and corrupt government officials,” McLeod said. “Giv- en my experience doing investigations in Cambodia, I am convinced that laundered money from the PRC is a substantial portion of property investment in Phnom Penh.”
Another major selling point for Chinese buyers – one that features prominently in marketing materials for many real estate developments – is that Cambodia is a key participant in “One Belt, One Road”, an infrastructure initiative from President Xi Jin- ping of China that is harnessing hundreds of billions of dollars in state and private investment to bring Southeast Asia, Central Asia, Europe and other regions closer to China.
In December, Chinese firms pledged to invest an additional $7 billion in Cambodia, including in a highway that will connect Phnom Penh with Sihanoukville, Cambodia’s main port. Sihanoukville is also a major destination for Chinese property investment and China’s Belt and Road ambitions.
The highway will reach from Sihanoukville on the Gulf of Thailand to Phnom Penh’s international airport. Unsurprisingly, the Sen Sok district surrounding the airport is attracting more Chinese residential development and investment.
Like Prince Real Estate’s developments, the Star City project in the Sen Sok district is also using the Belt and Road initiative to attract buyers. The nearly 122,000-square-metre joint development by the Cambodian conglomerate Thai Boon Roong and China’s Xinghui Property is being built by a company from China’s Sichuan province. It will feature five condo buildings and a hotel, apartments and offices, with a total of 2,112 units for sale.
Star City’s location near Phnom Penh’s airport and the highway to Sihanoukville is made even more attractive by lower costs for condo and apartment buyers, the Star City deputy sales manager, Chhiv Vining, said. The Sen Sok district is an upand-coming area with units starting at $1,600 a square metre.
Chhiv said that 80 percent of Star City’s Tower A had been sold, and sales had just begun on Tower B, but were limited to studios and one-bedroom units. She estimated that Chinese investors accounted for 80 percent of buyers so far.
“We’re looking to the Chinese market first,” she said.