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Friday, October 23, 2009

CBRE spots opportunity in Cambodia

Foreign ownership set to stimulate market

PHNOM PENH : CB Richard Ellis Group Inc (CBRE) is opening a new office in Phnom Penh to expand its footprint in Southeast Asia. The company aims to capitalise on growing demand for professional real estate services and is also planning ahead to serve the market on Cambodia's southern coast.

"The opening of an office in Cambodia will allow CBRE to provide research, consultancy, valuation and advisory services in the country and will strengthen our broader platform in Southeast Asia," said Daniel Parkes, country manager of CBRE Cambodia.

He said land prices in Cambodia had eased back from the sharp rises experienced since 2005. The market could be compared to Thailand, in particular Bangkok in the late 1980s, and Vietnam in the early 1990s - with a lot of potential for growth, few modern developments but latent demand.

The good news, he said, is that the government is very pro-investment and is offering a tax cap of 20%. It already offers 99-year leases to foreigners and is considering full foreign freehold.

Cambodia's Council of Ministers in July approved a sub-decree covering new co-ownership regulations, allowing legal ownership of individual apartments or condominium units, which paves the way for a law allowing foreign ownership of some property.

The new co-ownership regulations will make it possible to own units within a larger building without having title to the land it occupies. The goal is to guarantee and protect rights of legal holders in apartments or condominiums for co-ownership. It will also facilitate management on behalf of co-owners who live in the apartments or condominiums.

As well, the new regulations facilitate co-ownership for sale, exchange, donation, inheritance, permanent rental and collateralising of private holdings as personal ownership.

Foreigners have not been able to own Cambodian land or housing in the past. They could only rent property for their business or residence. Also, foreigners cannot buy land near borders with neighbouring countries because it could affect national sovereignty and security.

"The market is not without challenges and is coming off a low base," said Mr Parkes. "There is no doubt that per-capita income in Phnom Penh is continuing to improve, with a surprisingly high number of private cars, trucks and bikes.

"Inbound retailers, while they lack a modern centre, are enjoying good business - for example, pizza franchises. There is only one modern high-rise office, Canadia Tower, which is soon to be completed. Projected rents are comparable to those of Bangkok's Grade A space."

In 2008, the GDP of Cambodia reached $9.2 billion, with tourism contributing $1.72 billion. Culture has played a key role in Cambodia in the past three decades and has created many jobs. From 2000 to 2008, GDP per capita in Cambodia increased by 158% from $286.90 to $739.

Take-up of industrial property is slow but major global companies are already buying land for assembly and manufacturing facilities, said Mr Parkes. There is also a fledgling condominium market and Korean developers have been active. There has also been a boom in new villas, with prices of up to $1 million each.

Chris Brooke, president and chief executive officer of CBRE in Asia, said the company's presence in the market would facilitate the provision of professional property services, while also supporting regional clients who have an interest in a unique emerging market.

As the capital, Phnom Penh has become a major focal point for economic and business development in recent years, said Mr Brooke. This region offers enormous business potential for further growth of domestic and foreign businesses.

In particular, backed by investment resulting from positive sentiment, Cambodia's real estate market is expected to continue its growth momentum in the years to come, particularly the resort property market along the coastline.

In the future CBRE will consider a resort office on the south coast, with the opening of the Ream airport, said Mr Parkes.

The company already has two major contracts. It is the sole agent for marketing exclusive villas on a private island, which are priced from $200,000 and come with hotel management and guaranteed returns. The company also has a key advisory role for Koh Rong, an island being positioned as an eco-tourism destination and a potential rival to Phuket and Koh Samui in Thailand.

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