9^th June 2012

The first Market Focus we ever ran in Property Report back in 2004 was on Phnom Penh. The headline was ‘Colonial restoration bargains in the Wild East’ and looked at the frenzy of redevelopment of elegant but faded French villas that was going on all over town.

Nigel Ghotbi, an Anglo-Cambodian property agent, who was a big player in the local market at the time and since seems to have faded from view related to me how land was valued back in the post-war decade.

“There’s a lady called Mrs Pon, she has a huge villa out of town. If you want to sell your property, you go and see Mrs Pon and on the wall behind her desk she has a big chart with every street in Phnom Penh and per metre land prices listed on it. You tell her where your property is and she looks down the graph and will give you a price. It doesn’t matter if you’re selling the Intercontinental or a shack down the same street, the price remains fixed and you take it or leave it. Of course you probably wouldn’t go to Mrs Pon unless you were desperate to sell, but her chart is still the best barometer of land and property prices in Cambodia,” he told me.

In order to ensure that any haggling was kept to a minimum, Mrs Pon apparently had an army tank and a small unit of fully armed infantrymen permanently stationed outside.  Whilst it’s good to see that times have changed enough that CB Richard Ellis Cambodia and other agents can go about their business without need of a private army, in some ways the market now seems just as ‘through the looking glass’ as it was then.

The recent news that the development of the filled in Boeung Kak Lake by Chinese developer Erdos Hong Jun Investment Co seems to be permanently stalled with workers having left the site does not bode well.  The lake, which once provided the city’s main flood protection as well as a vital source of water and homes to thousands of people on its shores, was deemed surplus to requirements some years ago and sacrificed for the sake of progress in the form of a high rise satellite town which was set to spring up on the land.  As yet, nothing has happened and now quite possibly never will.

The same can be said for the equally ambitious if slightly more developed (some towers have been finished) Camko City development nearby.  When this was launched at MIPIM a few years ago, it had one the biggest and most elaborate models in the show promising a mini-Singapore on the Mekong. If only the developer had bothered to ask any Cambodian’s if they might want to actually live and do business there, they could have limited their expenses to a very nice toy town and a few nights stay at the Hong Kong Hyatt.

Perhaps one day the emerging Cambodian middle class will want a HDB clone to call their very own, but it always seemed perverse to think that locals or anyone else in South East Asia’s most sparsely populated capital city, with some of the best preserved and most beautiful examples of colonial architecture in the region would be queuing up to live in these places.

Brocon, developer of the award winning Song Saa Private Island, cut its teeth renovating colonial villas to exceptionally high standards and selling them on. CBRE’s office was until recently located at Colonial Mansion, a serviced apartment that would fit right in on the streets of Paris. Rents on the best villas are sky high and they are most expats first choice of accommodation.

Obviously, the property market can’t exist solely for a few wealthy locals and expats and the rest of the population needs somewhere to live other than corrugated sheds, but it would be good for Cambodia to appreciate the huge value in what it already has in Phnom Penh and the potential for it becoming the Paris of the East once again if developed with a bit of care and attention. Unless of course the plan is to ring the city with crime-ridden banlieues springing up in abandoned buildings and really get the comparison spot on.

Sure, it needs more commercial buildings, but maybe just do them one at a time as per market demand, like Vattanac Capital that’s going up now, instead of by the dozen and hoping for the best.  Mega-projects are rarely necessary anywhere. Two simultaneous ones, even less so.  Perhaps someone should give Mrs Pon a call to check what the current value of them is.

Hopefully lessons have been learnt. But in the Phnom Penh property market it’s hard to say.  As Nigel Ghotbi puts it back in 2004, ‘If you see a villa you want to buy and you go to the owner and the price is higher than you think it should be, the owner would rather wait and sell it to your grandchildren, rather than negotiate on price.  If the demand is zero, then prices will often rise.’

Republished with permission of the author, Terry Blackburn, CEO of Ensign Media, Publisher of Property Report South East Asia

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