Phnom Penh condos bring strong returns for investors
Phnom Penh condos bring strong returns for investors
According to a new report published by local real estate consultancy, Independent Property Services Cambodia (IPS Cambodia), Cambodia’s capital city, Phnom Penh, is increasingly standing out to international and regional property investors due to its unique affordability for new condominium purchases, alongside world-class rental return rates for completed apartment units in the city’s downtown quarters.
The IPS Cambodia analysis, entitled “Why Phnom Penh is Southeast Asia’s New Real Estate Hotspot”, explores market conditions for foreign-ownership of real estate in Phnom Penh, and compares the latest price trends to other popular regional and global real estate investment markets.
The report identifies, based on 2023 data, that in terms of the average cost per square meter to purchase inner-city condos in Phnom Penh, investors can expect to pay around $2,300 per metre.
This pricing is still highly competitive when compared to a plethora of Asian and global capital cities, the report noted, meanwhile there remains significant value and capital appreciation potential in Phnom Penh due to ongoing growth in both population and investment.
In comparison, the UAE’s capital, Dubai, averaged $3,900 per meter; Vietnam’s Ho Chi Minh City averaged $4,700 per meter; and Bangkok, Thailand’s capital city, averaged $5,650 for inner-city condominium buyers as of 2023.
Meanwhile, compared to other global real estate markets, Phnom Penh’s prices remain highly affordable.
In Seoul, South Korea, average purchase prices reached $21,200 per meter in 2023; Singapore averaged $20,150; and Shanghai, China, $17,900.
Despite the low purchase prices, Phnom Penh condos are demonstrating world class rental returns, according to the report’s findings.
In terms of average gross rental return per annum for inner-city condos, during a 2022 to 2023 survey period, Phnom Penh condos averaged annual return of 7.5 percent (as calculated based on a proportion of the original purchase price).
As stated by the report, “rental yields on condominiums in Phnom Penh are amongst the highest in Asia and beyond.”
According to the findings, Phnom Penh’s rental return rates matched Vietnam’s Ho Chi Minh City, which also averaged 7.5 percent per annum.
In comparison, Dubai witnessed average annual returns of 5 percent; Bangkok averaged 4.5 percent; and Germany’s capital city, Berlin, earned an average of 3.75 percent yearly for investors.
Meanwhile, Phnom Penh’s average returns for investors also outweighed some of the world’s most renowned and expensive cities.
In Seoul, South Korea, average return rates were just 1.75 percent per annum; London, UK, averaged 2.25 percent; and USA’s New York City also demonstrated yearly returns of just 2.25 percent.
In terms of appreciation prospects for Phnom Penh-based foreign investment properties, the IPS Cambodia analysis identified several factors expected to drive both purchase and sale prices, and maintain high returns for owners, in future years.
Firstly, Phnom Penh’s economic growth, coupled with ongoing infrastructure developments, positions it as an emerging market with strong potential for capital appreciation.
Citing the World Bank, the analysis noted that in 2024 Cambodia has been heralded as “one of the fastest-growing economies in the world,” averaging an annual gross domestic product (GDP) rate of 7.6 percent over the past two decades.
Meanwhile, the vast majority of this economic output has emanated from Phnom Penh and its hinterland, noted the IPS report.
Importantly for the real estate sector’s long term prospects, the report said that domestic demand for housing is also growing rapidly in Cambodia, thanks to a particularly youthful demographic.
In addition, Cambodia’s urbanization rates remain comparatively low, with only around 25 percent of the population currently living in urban areas.
In comparison to Vietnam, urbanization rates are close to 40 percent already; and in Thailand around 50 percent.
Given these demographic indicators, the IPS report contends that Phnom Penh real estate demand is only set to surge in the coming decade.
Another important factor supporting foreign property investments in Phnom Penh is that the city is becoming a popular living destination for expatriates, “attracted by a relatively low cost of living, vibrant cultural scene, and modern conveniences.”
