Cambodia: Overview

RENTAL YIELDS

Poor yields in Phnom Penh at 4.6%

Gross rental income on flats in Phnom Penh is around 4.6%, reaching as high as 4.88% for 120-sq. m units. The average selling price of flats is around US$2,502 per sq. m.

There is no yields information on villas in Phnom Penh due to insufficient data.

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TAXES AND COSTS

Witholding tax is 10% or 14% in Cambodia

Rental Income: The tenant must withhold 10% of a resident landlord’s rent, and 14% in the case of a non-resident landlord. No VAT or income tax are payable.

Capital Gains: No capital gains tax is payable, but capital gains tax will soon be introduced at 20%, payable on the net gain after deductions.

Inheritance: By law, foreigners must apply for citizenship to be able to inherit property in Cambodia.

Residents: Residents are taxed on their worldwide income.

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BUYING GUIDE

Transaction costs are moderate at 3.9% to 6.5%

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.

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LANDLORD AND TENANT

Cambodia's rental system is pro-landlord

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.

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ECONOMIC GROWTH

Rapid growth

Cambodia has experienced enormous economic growth over the past few years. Phnom Penh is now an elegant, well-planned, prosperous city – freshly painted, bristling with economic activity, foreigners, and new projects.

In Cambodia’s elegant, booming leading cities, it is hard to believe that Cambodia’s populations of 15 million are one of the poorest in the world, with a GDP per capita of US$555. 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.

Cambodia’s Prime Minister Hun Sen is one of the world’s longest serving prime ministers having been in power since 1985. He was reelected in 2004 after a year of political deadlock. He was previously a member of the Khmer Rouge, which under its leader Pol Pot seized power in 1975 and established a radically communist government till its overthrow in 1979. About 1.7 million died during the first three years of the regime, either through political persecution or starvation.

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. The progress achieved since 1985 has been extraordinary. Democracy was reestablished during the 1990’s, and the country now has an undoubted self-confidence and stability – almost a textbook example of the Asian authoritarian model. Roads are built, projects undertaken, historical monuments are restored, and laws are passed (with the assistance of a large number of World Bank, UNICEG, UNDP, IMF and other foreign advisors).

Economic growth was estimated to be 7% in 2007, after 9.5% in 2006 and 13.4% in 2005. Growth is concentrated in tourism and the textile sector, which is dependent on most favoured nation status agreements. Inflation is contained, with annual CPI growth of 5.75% at December 2007.