High-end condominium supply continues to outpace demand for the lack of ability to serve locals’ housing needs while the stress on Phnom Penh to further urbanise accelerates. Thus, developers are starting to focus on mid-range condominiums to cater to the slow but growing middle class that are altering their conventional housing habits, real estate experts say.
According to CBRE’s yet unreleased third quarter Condominium Report, current figures push supply of condominium units to 20,000 by 2018, with mid-range units representing around 45 per cent of the lot while high-end condominiums account for around 35 per cent – supply figures that several real estate experts now believe to miss actual demand because most Cambodians who may be keen in purchasing condominiums cannot afford to purchase those from the high end of the spectrum.
Kevin Goos, CEO of Century21 Cambodia, said, “the real research is that high-end condos are not selling right now; there is no turnover.”
As a result, developers are turning to the medium range, typically offering prices per square metre of between $1,000 and $1,500, and unit prices ranging from $28,000 to $90,000.
“The supply of mid-range condos is starting to take shape more recently, and developers are starting to take notice of this fact now, and better understand the market,” said Saraboth Ea, Managing Director of Maxem Property.
Goos believes now is the time to capitalise on the mid-range segment as demographics show that a larger customer base will continue to emerge.
“The future of the local real estate industry right now is focusing on the middle class and emerging affluent markets,” he said and added, “when we begin to see a middle class emerging and having purchasing power, we also begin to see the real estate boom in Cambodia.”
As developers start to further analyse the mid-range condominium market’s potential, financing options and payment plans will likely follow suit, making it more likely that local buyers will be able to attain residency, believe Ea and Goos.
With research further hinting that the middle-range condominium market is becoming increasingly attractive, real estate experts begin to specify the demographics of their clientele.
“I tend to look at it in terms of these segments – there is the middle class whose income ranges from around $800 to $2000 per month, and the emerging affluent earning between $2,500 to $5,000 per month,” Ea said.
These purchasers are mostly college graduates, newly married couples who both hold white-collar jobs, and nucleus families that pool their several sources of income together.
Increased wealth among young professionals is not the only reason for mid-range condominiums becoming increasingly attractive. Social changes fuel them alike, according to Ea who said that working professionals who tend to have a more open mindset also want to break out from the traditional family unit and live on their own, while also living in close proximity to their workplace, shopping malls, restaurants and bars.
“The appeal is more of the lifestyle of living in the city and having more access to trendier areas,” said Ea.
At the same time, the rise of the new urban condominium lifestyle is dictated by market realities.
Local tradition of buying landed property to live in has become unattainable for many.
“Even though Cambodians still prefer to live in landed properties – shophouses or flathouses – in Phnom Penh now, you would not be able to find a traditional three-storey flathouse for under $200,000,” Ea said.