Cambodia’s sluggish property development activity continues, says World Bank
The World Bank in its Cambodia Update report stated that a partial recovery of the travel and tourism sector has improved economic prospects of tourism-related construction activity, despite continued sluggish property development activity.
It added that staycations among domestic tourists continue to initially support the occupancy rate. This helped stabilize and cushion sales prices and rents of affordable and midrange condominiums.
The occupancy rate is recovering as the tourism sector and domestic economic activity continue to sustain a gradual recovery.
Affordable hotels experienced a recovery as budget tourists and business travelers seem to have returned. Demand for centrally owned office supply stabilized, with an occupancy rate of 70 percent in the second quarter of 2022 as face-to-face interactions picked up. Retail supply improved, with an occupancy rate also of 70 percent.
However, property development activity continues to suffer from excess supply, with reduced foreign investor appetite for investing in property development projects. Reflecting continued sluggish demand in the property and real estate market, approved construction permit value contracted by 54 percent (figure 7) during the first 8 months of 2022.
Prospects for the construction and real estate sector remain uncertain even after the pandemic ends. It is unlikely that construction will once again be a main engine of economic growth in the near future, despite a continued recovery of the travel and tourism industries.
For several years preceding the crisis, Cambodia experienced an unprecedented construction and real estate boom, which created excess supply. External demand for the country’s commercial and residential property partly contributed to the boom.
Sihanoukville was one of Cambodia’s urban centers that experienced the most rapid construction boom during the pre-pandemic period, with an influx of Chinese investment due to a prospect of a high investment return from tourism activities backed by a short-lived casino industry.
The seaside provincial capital of Sihanoukville received $5.8 billion of approved construction projects in 2019–20. The pandemic and then China’s zero-COVID-19 policy continue to curtail construction and real estate activity. The World Bank