Cambodia’s property market is still somewhat depressed. However, the new foreign ownership law is undoubtedly helping the property market recover.
The number of property transactions increased threefold in 2010 thanks to the new law, according to Sung Bonna, President of National Valuers Association of Cambodia (NVAC).
Foreigners are now allowed to own apartments and condominium units, but not land, and therefore not the first floor of buildings, under the new foreign ownership law approved by King Norodom Sihamoni in May 2010. In 2010, tax revenues from property-related transactions soared 60% to KHR76.21 billion (US$19.5 million), from KHR47.7 billion (US$12.2 million) in 2009. This is still far below the level of transactions seen in 2007 and 2008 - but it is a real recovery.
In 2005, the Cambodian government amended its investment law to allow foreign ownership of buildings. However, the law was never implemented and the idea floundered, since the country was then experiencing one of the biggest property booms in Asia.
Land ownership is against the Constitution and is still out of the question. Land can however be held by foreigners on long (renewable) leases, and through majority locally-owned companies incorporated in Cambodia. These structures are argued by lawyers in Cambodia to be safer than legal schemes in any other South East Asian country in which foreign land ownership is formally prohibited.
The number of property transactions increased threefold in 2010 thanks to the new law, according to Sung Bonna, President of National Valuers Association of Cambodia (NVAC).
Foreigners are now allowed to own apartments and condominium units, but not land, and therefore not the first floor of buildings, under the new foreign ownership law approved by King Norodom Sihamoni in May 2010. In 2010, tax revenues from property-related transactions soared 60% to KHR76.21 billion (US$19.5 million), from KHR47.7 billion (US$12.2 million) in 2009. This is still far below the level of transactions seen in 2007 and 2008 - but it is a real recovery.
In 2005, the Cambodian government amended its investment law to allow foreign ownership of buildings. However, the law was never implemented and the idea floundered, since the country was then experiencing one of the biggest property booms in Asia.
Land ownership is against the Constitution and is still out of the question. Land can however be held by foreigners on long (renewable) leases, and through majority locally-owned companies incorporated in Cambodia. These structures are argued by lawyers in Cambodia to be safer than legal schemes in any other South East Asian country in which foreign land ownership is formally prohibited.
Analysis of Cambodia Residential Property Market »
RENTAL YIELDS
Last Updated: May 31, 2010
Gross rental yields on apartments in Phnom Penh can be highly attractive. Our research suggests that first floor apartments are the most attractive, with rental returns of around 11% available (if rental returns are your aim).
Second floor Phnom Penh apartments are also attractive, with gross returns of around 7.7%
Landed property in Phnom Penh, a category which includes 1st floor apartments but also villas, tends to earn much lower gross rental yields. These categories are not unattractive investments, however, as these lower returns are compensated for by a higher potential capital gains upside.
Second floor Phnom Penh apartments are also attractive, with gross returns of around 7.7%
Landed property in Phnom Penh, a category which includes 1st floor apartments but also villas, tends to earn much lower gross rental yields. These categories are not unattractive investments, however, as these lower returns are compensated for by a higher potential capital gains upside.
TAXES AND COSTS
Last Updated: Sep 12, 2011
Rental Income: Income from leasing property is subject to withholding tax at 14% for nonresident landlords and 10% for resident landlords.
Capital Gains: Capital gains are subject to profits tax at a flat rate of 20%.
Inheritance: There are no taxes on inheritance in Cambodia. By law, foreigners must apply for citizenship to be able to inherit property in Cambodia.
Residents: Residents are taxed on their worldwide income.
Capital Gains: Capital gains are subject to profits tax at a flat rate of 20%.
Inheritance: There are no taxes on inheritance in Cambodia. By law, foreigners must apply for citizenship to be able to inherit property in Cambodia.
Residents: Residents are taxed on their worldwide income.
BUYING GUIDE
Last Updated: Jul 08, 2007
The total round-trip transaction costs of buying property are between 3.9% and 6.5%. Much of this goes to the real estate agent, around 3%.
Foreigners will need to set up a landholding company or a lease structure, which can be more expensive than the buying cost because of legal fees.
Foreigners will need to set up a landholding company or a lease structure, which can be more expensive than the buying cost because of legal fees.
LANDLORD AND TENANT
Last Updated: Dec 11, 2006
Cambodia’s legal system is generally pro-landlord.Rent: Rents can be freely negotiated and there is no specific tenant protection law.
Tenant Security: There are no limits to the duration of leases, though residential long-term leases usually last for one year. However, the rental agreement may be terminated prior to expiration if either the tenant or the landlord serves a notice one or two months before termination.
ECONOMIC GROWTH
Last Updated: Apr 26, 2011
Rapid economic growth
Cambodia has experienced enormous economic growth over the past few years. From 2003 to 2007, the Cambodian economy grew by an average of 10.6% per year. Growth is concentrated in tourism and the textile sector, which is dependent on most favoured nation status agreements.Economic growth slowed to 6.7% in 2008, and then contracted by 2% in 2009, due to the adverse effects of the global crisis. In 2010, the economy resumed to growth, with a GDP growth rate of 4.8%. The total number of tourist arrivals rose by 16% to 2.5 million in 2010.
In 2011, the economy is expected to expand by about 7%, due to strong rebound in tourism, garments manufacturing, and agriculture, according to the Ministry of Economy and Finance. However, the construction sector, which fuelled Cambodia’s double digit growths for much of the past decade, is still down.
Phnom Penh is now an elegant, well-planned, prosperous city – whitewashed, bristling with economic activity. Angkor Wat, built during the glory days of the Khmer Kingdom of Angkor (900AD – 1200AD), attracts hordes of tourists, and Siem Riep is a charming city.
Nevertheless, Cambodia’s population of about 15 million is one of the poorest in the world, with a GDP per capita of about US$800 in 2010.
The country is still dependent on foreign assistance, which accounts for about half of the government’s budget.
The Cambodian economy is heavily dollarized; the Riel and the US dollar can be used interchangeably. However, the government has a long-term goal of reducing its reliance on the greenback, which accounts for more than 90% of all currency in circulation in the country, according to the Asian Development Bank (ADB).
Cambodia’s strong man, Prime Minister Hun Sen is one of the world’s longest serving prime ministers having been in power since 1985. He was re-elected in 2004 after a year of political deadlock. In 1997, he seized power from his co-prime minister, Prince Ranariddh. Political activists caution that his rule is increasingly becoming more authoritarian.
Some would call Hun Sen a visionary leader, though his rule attracts mixed reviews. There is extensive political and judicial corruption, but on the other hand the government is manifestly competent, which appears to be due to Hun Sen’s personal drive and energy.
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