Speculators the big losers as property market stalls

Written by SOEUN SAY AND GEORGE MCLEOD

Thursday, 18 December 2008 Phnom Penh Post

While some predict a turnaround in as few as two years, the fortunes of thousands are being wiped out as real estate values fall in the short term Photo by: TRACEY SHELTON A house up for sale in Phnom Penh. Demand has fallen off as property prices decline across all segments. SIX months ago, 38-year-old Hem Davuth was living large and earning tens of thousands of dollars buying and selling real estate in Cambodia's roaring property market. Now, he says, most his profits have evaporated along with the values of his real estate holdings. "I cannot earn money like I did in 2005 and 2007. At that time, I made at least US$4,000 per month. Now I don't earn anything," he said. Hem Davuth's story shows how quickly fortunes have changed in Cambodia, as high-flying speculators are humbled by a hot property market gone sour. Modern Cambodia's first-ever property boom lasted from about 2006 to mid-2008, and translated into new-found wealth for an emerging middle class, as well as thousands of construction jobs. But the boom has come to a grinding halt as foreign investment dries up, bringing property values down an estimated 25 percent over six months, say industry players. Now, experts estimate that thousands of speculators have been wiped out by the crunch, along with an unknown number of property-related jobs. the prices ... have been overinflated. Everyone jumped on the greed bandwagon. "About 5,000 land speculators have lost their fortunes after the property market downturn brought on by the global economic crisis," said Meas Tola, managing director of Angkor Real Estate of Cambodia. He says his company's future is in question as commissions fall to almost nothing. Sung Bonna, president and CEO of Bonna Realty and president of the National Valuers Association of Cambodia, said that the property recession will have broader implications for the economy. "We are very worried about all of them [speculators] losing their income. Many businesses face crisis," he added. The crisis will cut disposable income for many Cambodians, hitting everything from luxury car purchases to high-end restaurant sales, he said. Kang Chandararot, president of the Cambodia Institute for Development Study, blamed the global economy rather than local conditions for the sliding market. "Some who earned a lot of income from the real estate boom are going bust," he said. Local officials are optimistic that a turnaround could come as soon as next year, but one regional property expert said the market might take years to recover. "The prices in Phnom Penh have been overinflated. Everyone has jumped on the greed bandwagon. ... Now we are seeing a lot of major construction projects being put on hold or cancelled," said Naim Khan-Turk, the director of research and consultancy with CB Richard Ellis in Ho Chi Minh City. "Cambodia is going to have a reality check. Speculators have been borrowing to buy condos that aren't built and they are not going to be able to pay the banks; then the suppliers won't get paid and everyone is going to lose," he said. "You aren't going to see as many local job losses as in places like Vietnam because most of the companies and suppliers are coming from abroad. That will insulate Cambodia to some extent," he said.