Inflation, Pandemic Reopening and Heavy Supply Create Valuable Opportunities for Cambodian Market Property Investors in 2023…
Cambodia and Asia-Pacific Market Outlook For The Year 2023
In the first quarter of this year, some major market forecasting and analysis whitepapers have been issued by industry leaders such as CBRE and Knight Frank, amongst others. In the beginning of the quarter, most all COVID-19 pandemic restrictions have been lifted here in Cambodia and most all other countries in the region have re-opened. However, even given the lifting of restrictions, there are still many complications stagnating the global and regional economy here in South East Asia and Cambodia. Some of the common themes found in the forecasts are regarding increased supply and slowing investment across the residential real-estate sector here in Cambodia.
ODOM Living and ODOM Tower Phnom Penh
Gardens at ODOM
Cambodia
Gardens at ODOM
With many new buildings under completion coming online both this year and the last, there has been a strong uptick in the supply of luxury and mid-range condominiums. This expanding supply has ultimately increased competition and further depressed prices beyond the effects of a global economic headwind created by skyrocketing inflation and general fears of a global slowdown. Thus, with the resultant lower pricing in boreys, condos and rentals in this purchaser’s market environment; some of the key property sectors that still retain strong prospects for heavy returns on investment are Hospitality, Agriculture and Manufacturing. It is certainly a risk-off buyers’ market moving through to the end of the year 2023 and there will be real value for the right investors whom have the capital to take advantage of this depressed pricing. Anecdotally, as many recall, the famed billionaire investor Warren Buffet is well remembered for advising his clients that there is no better time to buy properties and businesses than during a recessionary market when prices are down.
The Peak Phnom Penh
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Hospitality properties maintain significant revenue prospects this year as the COVID crisis has come to a close and tourism expected to more than double from last year, with millions more coming visitors to visit Cambodia and the region this year. The re-opening of China will bring much of this tourism related business, but there is also a domestic increase in tourism to coastal properties and Sihanoukville.
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Tourism generally has been made much easier with the completion of the toll freeway between Phnom Penh and Sihanoukville cutting travel times to various destinations at the bay. The highest upside potential in hospitality this year will be the budget travel sector with areas like experience based travel, co-living, Eco-tourism and spa/ health and wellness travel options. The 5 star hotels and casinos market is still saturated and perhaps the most upside will be coming from the domestic-budget or international-backpacker market(s.) Now that the pandemic is largely over, we expect tourism to continue to grow though out the long term.
In terms of Manufacturing, there has been a 28.4% rise in active factories up to 1,962 total over the past few years. For this year specifically, there is a 15.2M investment in manufacturing facilities just established by The Council for Development of Cambodia (CDC) to carry the trend beyond this year. These manufacturing projects will mainly be located in Phnom Penh, Say Rieng and Kampong Speu. Some of the businesses include additions to Cambodia’s already large garment, textile and footwear industry, but also non-garment manufacturing such as bicycles, furniture, solar panels, electronics components, automotive and agriculture processing. The new investments are said to create over 3500 jobs upon completion.
As for agriculture properties and farmland, The Prime Minister of Cambodia had stated that there will be an expansion in rice plantations with upgraded farming methods in the northeast corridor along with a focus on Cashew farming in the coming years to make Cambodia a regional and global leader in Cashew export markets. Another major undertaking is HLH Agriculture’s strategic partnerships program offering up 5000 hectares for investment in cassava farming to expand its existing plantation. The company will also offer the option to plant mangoes, bananas, sugarcane, cashew-nuts and tropical-fruits. The Government of Japan has invested in multiple chicken farm projects to strengthen chicken production. This 200,000USD investment was signed by the Ambassador of Japan to Cambodia on March 14th and included infrastructural development with a bridge project.
Other infrastructure projects will be green lit this year by the Government of Cambodia with a loans withdrawal of 1.34B, of which 64% of the assets will be delegated to infrastructure projects. Finally, by the end of the year, the Government plans to turn Sihanoukville into a multi-functional special economic zone for ease of trade at the port and streamlining other trade and port infrastructure issues.
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ADO GDP forecast FY 2022 to 2024
While the market here in Cambodia continues to grow, it will be at a slower pace due to any hard or soft-landing as the Federal Reserve in the US and other countries continue to raise rates. Recent calamities in the first quarter due to the collapse of SVB bank, a subsequent bail-out of two other banks in the US, and along with the merger of UBS and Credit Suisse’ in Europe all have caused a flight to investments of higher quality and reduction of risk in portfolios. A fear of contagion in the financial sector, and ultimately a global recession, has only been slightly curtailed by Federal Reserve press statements and a slowing of rate hikes. Thus, moving forward though 2023, we expect these factors to continue normalizing growth across the Asia-Pacific region as well as macro-economically. By the end of the year we should see the local market regain a stronger footing after a clearer picture of the long-term growth prospects is established.
Morgan Enmaison
Call S.E.A.P.S. today for further consultation regarding market forecasting, prospects here in Cambodia and property investments across all of South East Asia.