Q and A with CBRE’s James Hodge: the impact of the coronavirus pandemic on Cambodia’s real estate

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by Sum Manet

Phnom Penh: The global economy is currently in recession due to COVID-19, while key sectors of the economy remain uncertain. Cambodia is also one of the countries in the world where many sectors have been affected by the devastating virus.

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Real estate sector plays a vital role in the Cambodian economy. Today, Propertyarea.asia’s Sum Manet raises a number of questions regarding the current real estate sector in Cambodia with a foreign professional working in the real estate industry in Cambodia.
James Hodge, director of CBRE Cambodia, gave a special interview to Propertyarea.asia about the current and upcoming real estate market situation.

Propertyarea: As the coronavirus hit hard the global market in the last few months, real estate market is one of sectors impacted. Could you tell us about the current market in Cambodia during the outbreak?

James: The impact of the coronavirus pandemic on Cambodia’s real estate has yet to be fully realised. Whilst Cambodia has been lucky not to see more cases of Covid-19, and so far at least has managed to avoid the need for more draconian lock-down measures, the impact on business and international tourism is significant and will have far reaching impacts for the domestic economy and the real estate sector. Enquiry levels have fallen across the market, particularly in those parts most impacted by consumer caution and the exodus of expatriates, namely the retail sector and the serviced apartment sector. There have been price adjustments across the market, but in many cases it is too early to tell if price levels have stabilised yet – it is almost certain that the market is still adjusting to the new normal. Whilst market activity remains robust in some sectors, particularly if there is an appealing asset available at a reasonable price, many buyers remain in bargain hunting mode and there are few instances where sellers are prepared to drop their prices – as such there is a reduced volume of transactions and as such price discovery remains challenging.

Propertyarea: Real estate sector is divided into many sections. Which section is hit hard during this time?

James: To date, the hospitality and retail industries has seen the largest impact from the coronavirus pandemic. This is in part because they both immediately felt the impact of changes to customer habits; the reduction in tourist volumes has been dramatic and clearly caused widespread issues for the hospitality sector. In terms of the retail industry, during the most extensive period of concern in Cambodia instances of people attending retail and entertainment venues fell more 40% from normal levels. However retail has recovered somewhat, with activity currently around 18% below pre-pandemic levels. Other sectors have also felt the strain, but the effects are less immediate and less clear cut than seen in the hospitality and retail sectors.

Propertyarea: World Bank’s report said about 40 percent of Foreign Direct Investment went to real estate sector in Cambodia. What do you see the current inflow of FDI into Cambodia?

James: FDI inflows will undoubtedly be lower than if the pandemic had not struck, in a large part due to the significant curtailment of international travel and the resulting delays in decision making. However, CBRE Cambodia still see strong international interest in Cambodia, in principle from foreign groups already active in the country, but also from new investors considering diversification of their investments. The pandemic has shown that whilst on-the-ground decision making is important, much of the work needed for the deployment of investment can be done remotely if the situation demands.

Propertyarea: Currently, there is news about the return of Chinese to Cambodia as our market depends mostly on foreign investors, especially condo sector. Will it provide opportunity for condo sector? What do you think about current supply and demand in the sector?

James: Overseas buyers of condominium investments remain active, but they are rightly more cautious and want to make sure that they have sufficient information before investing, often sight-unseen. For instance, we are seeing very strong interest from a wide array of overseas investors, as well as from domestic buyers for the newly launched Leedon Heights development CBRE Cambodia are representing in Sen Sok district. Technology has been helping in the marketing of condominiums to overseas investors, allowing agents to interact with interested parties and to provide them with relevant details.

The recent arrival of more Chinese nationals in Cambodia highlights a return to a level of normality; however it is principally assumed that these travellers are either working in Cambodia or operating businesses here, rather than partaking in condominium investment.

Propertyarea: I am observing that Cambodia’s property market seems to be coming back to normal, local people resume purchasing property, especially landed property as usual. Do you think it is a sign that the market rebounce?

James: There was little reduction in the activity witnessed in the landed property market, although similar to other sectors there has been an increase in secondary market disposals at slightly reduced prices. Activity levels across the market are slowly transitioning back towards normal as confidence returns. However, it should be cautioned that the impact of Covid-19 is far from over, there remain a variety of external threats and market uncertainties which have been highlighted by this period of disruption. Commercial real estate decisions in Cambodia are far from just domestic affairs, and as the economy has globalised, so has the real estate sector – as such, decision making in the Asia headquarters of multi-national corporations, banks and investment companies, whether they be Hong Kong, Singapore or Beijing, increasingly impact the real estate market here. Carefully and accurately explaining the situation here in Cambodia is therefore critical to ensuring that overseas decision makers are supported in their assessments, especially as the impacts in Cambodia have differed from the experiences they may have had first hand.

Could you predict about the second half of the property sector in Cambodia?

James: We can expect uncertainty to extend into the second half of 2020; however, as some parts of the economy start to adjust to the new normal, there is cautious optimism in many sectors of the market and we certainly hope to see that translate into a strengthening of the increasing activity levels witnessed during the past month. However, there remain a number of head-winds and challenges that could easily knock confidence and cause further delays to the much needed recovery.

Propertyarea: And last but not least, how do you see the market after the coronavirus contained globally?

James: There are a plethora of questions about how the real estate market will respond once the coronavirus is contained. International travel has been particularly badly hit and we can expect it to be some time before we see a level of normality returning to the hospitality sector, although increasing domestic tourism will hopefully prove to be something of a lifeline to this sector. Other sectors will adapt to the societal changes that are demanded as a result of the coronavirus pandemic, particularly social distancing, the need for regular health checks and increased demand for high standards of cleanliness. We can expect some resurgence in investment as borders begin to open and investors deploy plans which have been delayed, however, the direction of those investments is likely to look a bit different to what they would have looked like before the pandemic, in order to better reflect the changes wrought on the market by this period of disruption.

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