Borey developers adjust strategies as sales decline
Condos and boreys have been experiencing a decline in sales, prompting developers to go back to the drawing board when devising financing strategies in a bid to lure back potential buyers.
Nget Piseth, director assistant of Borey Piphup Thmey, said recently that residential sales in his project have decreased compared to the same period last year, causing the company to develop new tactics to attract those who are looking for houses.
These new schemes include monthly payment in lieu of the usual deposit that requires the buyers to purchase a unit beforehand. He said the new option allows buyers to pay monthly without long-term interest.
He added, “Through this new market strategy, the sales have increased. The company has received more interest from buyers.”
Regardless of the slowdown in sales, said Piseth, Borey Piphup Thmey is still proceeding with their current residential development on Chamkar Dong Street and National Road 4.
Besides the project that started earlier this year in Ta Khmao, new projects are yet to begin.
At the same time, Borey Peng Huoth is trying out the same strategy by allowing a 30-year payment scheme for buyers in place of its previous 30 to 40 per cent down payment option.
Kim Heang, president of the Cambodian Valuers and Estate Agents Association (CVEA), said borey sales have declined because those who are able to afford residential housing have already done so.
Because all that are left within these boreys belong in the more expensive range of villas, there is not much demand from ordinary or middle-class home-lookers. He continued, saying that residential supply has surged these past few years, consequently leading to the deceleration of borey sales.
Nonetheless, according to an estimate by the Ministry of Land Management, Urban Planning and Construction, Cambodia is in need of 10,000 new residential houses per annum, but the actual supply has not reached the general demand of ordinary citizens who are unable to purchase any of the touted residences, like condos or boreys.
According to Po Eavkong, general manager of Focus Property, the real estate sector in Cambodia has reached the ninth or tenth point, which is the peak of real estate development. This means that the stagnation of condo and other residential sales is not new, but started since last year.
While these schemes do not provide significant benefit for long-term investors, it provides short-term relief and benefits to buyers.
He continued, “In a changing political and economic scene like this, it creates new risks for long-term buyers, so it’s better if developers provide discounts on their projects,” and added: “But, generally, developers tend to outsmart customers, so they don’t want to give out [too much] discounts because it will affect their profits.”
Eavkong explained that when a buyer pays over a long-term period, the price of their house can double. For instance, they would have to pay more than $300,000 for a $100,000 house had they coughed up for the full price at the start, “so people have to learn and understand long-term payment, their work stability, and their income,” he said.
Eavkong believes it is a perfect storm for the residential housing market with supply now outmatching demand. Furthermore, those who can afford new residential buildings are still limited and banks are now taking very cautious approaches when providing credits.
Huy Vanna, secretary of the Housing Development Association of Cambodia and a senior staff at Borey Vimean Phnom Penh, said borey sales this year have decreased all over Phnom Penh, limiting what borey developers are able to do rather than starting new projects.
Citing political reasons, he said that local and international developers alike are holding off on putting down any sort of capital especially with the current political tensions.
Eavkong, nevertheless, does not see politics as part of the reason why the slowdown had begun and continues to occur.
Vanna said, “I believe that the situation will improve in 2019. If the political situation improves, so will borey sales.
“But right now, Ly Hour [Borey Vimean Phnom Penh’s developer] is still continuing with new projects because he believes that [despite] the political situation, [new projects] will sustain the staff’s pay.”