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Everything you need to know is included in our Cambodia Property Pack
Are you considering buying real estate in the Kingdom of Wonder? Are you unsure if it's better to buy now or wait until next year?
When it comes to market timing, everyone has their own opinion Your childhood friend who now lives in Phnom Penh may suggest that now is a perfect time to invest, while your Cambodian wife might have a different view and suggest waiting for stability.
At BambooRoutes, when we create articles or update our pack of documents related to the real estate market in Cambodia, we dvocate for a fact-based mindset, rejecting unfounded opinions and baseless rumors.
We have collected and examined all the official reports and statistics from government websites. Based on this extensive research, we have compiled a complete and reliable database. Here's what we discovered, which can assist you in deciding whether now is the right time to purchase real estate in Cambodia.
Ready? Let's go!
How is the property market in Cambodia now?
Cambodia is, as we speak, a very fragile country
Negative
If you want to invest in properties, prioritize stability as it reduces risks and provides a secure investment landscape. It is an information you need as a foreigner buying a property in Cambodia.
Unfortunately, today, Cambodia is far from being a stable country. The last Fragile State Index reported for this country is 80.5, which one of the lowest values in the world.
Cambodia is a very fragile country because it is still recovering from decades of civil war, and its economy is heavily dependent on foreign aid and investment. Additionally, the country has a weak infrastructure and its political institutions are still relatively new and prone to corruption.
First signal is definitely negative. Let's examine more data.
Cambodia is projected to grow (a lot!)
Positive
Make sure the country's economy is strong before deciding to buy a property.
In accordance with IMF projections, Cambodia will end 2023 with a growth rate of 5.8%, which reflects the country's accelerated progress. Concerning 2024, the experts say 6.2%.
That's not all - this impressive growth will keep going on since Cambodia's economy is expected to increase by 28.4% during the next 5 years, resulting in an average GDP growth rate of 5.7%.
The expected massive growth in Cambodia means that investing in real estate in the country now will likely yield a great return in the future. Additionally, with more people investing in the country, the real estate market will become increasingly stable and secure.
On top of that, there are other indicators to pay attention to.
Cambodia's population is growing and getting richer
Positive
When you're exploring real estate options, population growth and GDP per capita demand thorough consideration because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In Cambodia, the average GDP per capita has changed by 7.4% over the last 5 years. It's a satisfactory number. Furthermore, the Cambodian population is growing (+4% in 5 years).
This means that, if you purchase a traditional house in Siem Reap and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.
If you're considering purchasing and renting it out, this trend is a good thing. Then, there might be a rise in rental demand in Cambodian cities like Phnom Penh, Siem Reap, or Sihanoukville in 2024.
No high rental yields in Cambodia
Neutral
Next, we will explore the rental yield.
It's the annual rental income of a property divided by its price. For example, if a property in Cambodia is purchased for 500,000 KHR and generates 20,000 KHR in annual rental income, the rental yield would be 4%.
Based on the data provided by Numbeo, rental properties in Cambodia promise gross rental yields from 3.5% and 6.2%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Cambodia.
It indicates a moderate level of income generation.
Everything you need to know is included in our Cambodia Property Pack
In Cambodia, expect moderate inflationary effect
Neutral
In two words, inflation is when prices go up.
It's when your favorite tuk-tuk ride in Phnom Penh costs 4,000 Cambodian riel instead of 3,500 Cambodian riel a couple of years ago.
If you're considering investing in a property, high inflation can bring you several advantages:
- Property values tend to increase over time, leading to potential capital appreciation.
- Inflation can result in higher rental rates, thereby increasing the cash flow from the property.
- Inflation reduces the real value of debt, making mortgage payments more affordable.
- Real estate can act as a hedge against inflation, preserving the value of the investment.
- Diversifying into real estate provides stability during inflationary periods.
Based on the IMF's outlook, the inflation rate in Cambodia will increase by 13.7% over the next 5 years, with an average annual increase of 2.7%.
This data is telling us that Cambodia could face inflation in the near future, which would lead to an increase in prices. Consequently, purchasing a property could become more expensive. However, if you buy now, there is a chance that your investment will appreciate, allowing you to sell it at a higher value in the future.
Is it a good time to buy real estate in Cambodia then?
Time to conclude !
Considering the current factors, 2024 might not be the optimal period for property investment in Cambodia, given the range of indicators that raise concerns. Despite projections of significant growth, several factors temper this potential. While the growing population and improving prosperity suggest a larger market, the overall fragility of the country introduces a degree of instability that could impact property investments.
The neutral signals, such as the absence of high rental yields and expectations of moderate inflation, further contribute to the cautious stance. These aspects indicate that immediate returns and purchasing power might not align with investor expectations, requiring a balanced assessment of long-term growth potential against short-term gains.
However, the current fragility of Cambodia as a nation stands out as a compelling negative signal. The vulnerable state of the country poses significant risks to property investments, including potential disruptions to the property market, political instability, and economic challenges that could affect property values and returns on investment.
In summary, while some favorable and neutral factors exist, the overall context, marked by Cambodia's fragility and the uncertainty it brings, suggests that 2024 might not be the most advantageous time for property investment in the country. Investors should carefully consider the potential risks and rewards before making a decision.
We sincerely hope this article has provided you with beneficial information!. If you need to know more, you can check our our pack of documents related to the real estate market in Cambodia.
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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
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