Tuesday, October 28, 2008

Cambodian Property Prices relative to other Asian countries

Follow up from the previous post on property prices in Cambodia. The first list below shows where Cambodia stands vis-a-vis other Asian countries (actually the research is based on the administrative/financial centre for each country). You can see that Phnom Penh's prices are outrageous--almost two times those of Kuala Lumpur's. This is despite the fact Malaysia allows foreigners to buy property (min value MYR250,000 and up to two residential properties) whereas in Cambodia foreigners can only buy leases. Which is why some Chinese speculators pay USD30,000 for a Cambodian citizenship (or so I was told by an American lawyer living in Phnom Penh), which enables them to freely trade in land.

I think Cambodian property prices here will collapse. We are not even talking about a correction. The prices of land across the country is led by prices at the high end. So prices in Kandal, Battambang where-ever, follow prices in Phnom Penh. People think their land is worth more because Phnom Penh's land is worth such and such. They'll be in for a shock when Phnom Penh's prices fall dramatically.

In a way I feel sorry for the ordinary Cambodians. Sipha (the one I sacked) for instance, kept asking me to buy property in Phnom Penh (and put it in her name--cunning!). She insisted Cambodia is different, when I explained to her how property prices are cyclical. I had told her about Singapore's boom in the 1990s and the crash in 1997 (caused by the Asian financial crisis), which led to a 30%-40% drop in property prices. She said, "Srok Khmer, ot." Only rise and rise. Property prices can only go up for ordinary Khmers like her, because that's all they've seen happen. That is why she went and bought land near Sihanoukville for USD3000. If she had borrowed money to buy it, she'd be in a spot. Sadly Cambodia is no different from the rest of the world when it comes to the boom-bust cycles of property prices.

Asia: Square Metre Prices

Hong Kong 16052
Japan 15851
India 11413
Singapore 10723
Taiwan 4424
China 2697
Cambodia 2503
Thailand 2492
Vietnam 2070
Philippines 1939
Malaysia 1366
Indonesia 1354

Source: Global Property Guide

And here, also of interest, is the comparison of the countries' gross national income and purchasing power parity (which takes into account the relative cost of living and inflation rates).

Asia: Gross National Income and PPP

Singapore 48,520
Hong Kong 44,050
Japan 34,600
Malaysia 13,570
Thailand 7,880
China 5,370
Indonesia 3,580
Philippines 3,730
India 2,740
Vietnam 2,550
Cambodia 1,690

Source: World Bank, Oct 2008

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