Investing in Cambodian real estate: realities and prospects

Investments and real estate in Cambodia
Purchasing real estate for obtaining citizenship in Cambodia

Tourist visits to Cambodia

Every year, numerous tourists from different corners of the world visit Cambodia, drawn by the unique location of this country on the world map. Tourists come from various countries, such as Vietnam, Laos, the USA, Europe, South Korea, and Japan. Despite a slight decrease in visitors from some countries since the beginning of 2009, the overall number of tourists has increased compared to previous years. It is expected that interest in this country will continue to grow.

Investing in Cambodia

Statistics for 2009 showed that Russia ranks third in terms of investment in Cambodia's tourism sector. Changes in legislation regarding foreign investments in real estate, which came into effect in 2005, led to a significant increase in property prices in the country. During the "economic boom" from 2004 to 2007, property prices rose annually by 25-40%.

However, in the middle of 2008, the market experienced a downturn. The capital outflow of South Korean investors following the onset of the global financial crisis led to a one-third decrease in transaction volumes compared to the previous year. This situation affected housing and commercial real estate prices.

The cost of real estate in Cambodia

As of today, a studio in the capital of Cambodia, Phnom Penh, can be purchased for $74,000, where you will get a new apartment with an area of 76 square meters, fully equipped. Three-bedroom apartments measuring 200 square meters will cost around $165,000. As for a villa in a five-star resort complex on the Koh Rong archipelago, its price will be about $576,000, including a restaurant, pool, spa center, and water sports center.

It is also possible to buy commercial real estate. For example, in Sihanoukville - the main resort and port of Cambodia, a new hotel can be purchased for $ 900,000. For this price you will get a hotel built in 2008, with 25 rooms and proximity to the sea.

The average cost of land plots in Cambodia in 2009 was $1,600 per square meter for residential development and $2,700 per square meter for commercial development.

Acquiring real estate for citizenship in Cambodia

This is the process of acquiring ownership rights to a residential property, including the signing of a lease agreement for a duration of up to 99 years. This transaction is protected in two ways: a copy of the lease agreement is carefully registered with local authorities and the cadastre, while the original is handed over to the buyer when they become a resident.

Legal protection and transaction process

For a successful transaction it is important to draw up the lease documents competently, lawyers, representatives of the building department or even the district governor will help in signing. A foreign owner has the opportunity to sell his property at any time, but the consent of a Cambodian citizen (the founder of the company) is necessary. The choice of a business partner plays an important role.

Registration of property and tax implications

There is also the option of registering property in the name of a Cambodian citizen, where there is no established period of ownership, and rights are transferred through a pledge agreement. One of the advantages is the minimal taxes, which for the buyer amount to only 0.1-1% of the property's value. The payment schedule can vary, but typically a deposit is made, followed by 35% of the value upon signing the contract, and the remaining 65% after receiving the main documents.

Management and additional services

Before purchasing real estate, it's worth deciding how much time you can spend in the country; it's easy to extend a visa for $300. The management company will assist in property management, for example, managing an apartment in Phnom Penh earns a 15% commission from the rent, and the guaranteed income reaches 12% annually. There is no property tax, except for unused plots with buildings.

An explanation of Cambodia's appeal to tourists and investors.

This is mainly due to the geographical location of the country.

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The main tourist flow here comes from Vietnam, Laos and the USA. The region is also visited by many tourists from Europe, South Korea and Japan, although their number has slightly decreased since the beginning of 2009. At the same time, the total number of tourists last year compared to 2008 increased slightly. It is expected that the number of visits will continue to increase. According to the results of 2009, Russia ranks third in terms of investment in the local tourism sector.

Real estate prices: then and now

After the government made amendments to the law on foreign investments in Cambodia's real estate market in 2005, a real boom began. From 2004 to 2007, the value of various types of real estate grew by 25-40% per year. By mid-2008, the bubble burst. South Korean investors played a leading role, starting to withdraw their funds from the country with the onset of the global financial crisis. As a result, the volume of transactions in the market fell by a third compared to the same period the previous year.

Cost

A new apartment of 76 square meters in the capital Phnom Penh - $74 thousand.
Three-bedroom apartments with an area of 200 square meters are approximately $165,000.
A villa in a five-star resort complex on the islands of the Ko Rong archipelago with an area of 270 square meters - about $576 thousand.

The complex, in addition to residential properties, includes a restaurant, a swimming pool, a spa center, and a water sports center. The average cost of land plots in Cambodia in 2009 was $1,600 per square meter for residential development and $2,700 per square meter for commercial development.

Features of conducting real estate transactions

When buying real estate in Cambodia, you will face a serious limitation: you will not be able to register it in your name. According to Cambodia Property, the purchase can be done in several ways.

Registration with a local company

At least one of the founders must be a Cambodian citizen, who will hold 51% of the acquired property.

Long-term lease

The purchase is registered to a Cambodian citizen, with whom a lease agreement is subsequently concluded for a period of up to 99 years. The security of the transaction is ensured in two ways: a copy of the lease agreement is registered with the local authorities, including the land registry, and the original real estate documents are handed over to the foreigner as soon as the resident receives them.

Registration for a citizen of Cambodia

The rights to real estate are transferred to the foreigner through the execution of a mortgage agreement.

Payment features

The total transaction costs for the buyer are only 0.1-1% of the value of the object. The payment schedule for each specific transaction may vary, but the approximate scheme is as follows:

Initially, a deposit of $2,000 is made.
At the time of signing the purchase agreement, 35% of the value of the property to be purchased is paid.
After that, titling begins for the new owner.
At this stage, all necessary taxes are also paid. Without this, the land registry will not begin the re-registration of property rights.
The buyer pays the majority of the amount (65%) only upon receiving the original documents for the property.

Prospects for real estate investment in Cambodia

According to the results of the analysis of the real estate market in Cambodia, we can conclude about its dynamic development and prospects for investment. Despite the fluctuations caused by the global financial crises, the country continues to attract both tourists and investors. Opportunities to buy housing or commercial real estate are diversely represented, and low taxes make this process even more attractive. It is important to keep in mind the peculiarities of real estate transactions in this country and choose the best way to purchase an object. With the right approach and understanding of the market, real estate investment in Cambodia can become a successful and promising investment.