Sim Hoy Chhoung is currently the managing director of Japan Valuers (Cambodia), a company that provides real estate valuation, business, corporation and transaction services to their clients. 

Prior to this, he was the CEO of VTrust Appraisal, one of the leading property valuation and advisory firms in Cambodia. Other industry experience includes investment consulting for a private equity firm.

WILLIAMS MEDIA spoke with Sim Hoy Chhoung of Japan Valuers (Cambodia) about his experience as a property valuer, and more specifically Cambodia's property market.  

What are some of the defining moments in the Cambodia real estate/expat history?

Cambodia has re-opened its economy after the 1993 general election assisted by the United Nations, the first multi-parties election in our modern history.

By our constitution, Cambodian people have the rights to own land and property in Cambodia. Over time, the government has relaxed property and investment laws to allow foreign investors/buyers to own above-ground properties. This newly enacted law allows foreigners to own above-ground, co-owned buildings with up to 70% of the whole building area.

Based on my experience, I would say some defining moments in the Cambodia real estate market are the re-opening up of our country, new real estate-related laws and regulations and the entry of mega-investors and developers from Japan, China, Singapore, Korea, Thailand, Malaysia etc. These international investors/developers have entered Cambodia's property markets in different sub-sectors.

In the residential segment, condominiums are a new living style. The condominium was mainly introduced in early 2010 by these foreign investors/developers. Since then, the supply has grown markedly starting from almost nothing in 2010 to total projected units reaching 35,000 by 2020. Big players in this space include Oxley Worldbridge etc., Prince real estate group, Creed Group etc. The supply sharply increased in 2016 and some experts said that 2016 was the year of condominium while 2018 should be the year of retail supply.

On the retail and hospitality side, we see large investments from Japan such as Aeon Mall 1 and 2 and the Toyoko Inn etc., Parkson Mall from Malaysia, Makro from Thailand, Sofitel, Marriott Brand Hotel…and so on.

We also see that more and more economic and industrial zones are being developed and expanded year on year mostly in border provinces and in Preah Sihanouk province of Cambodia.

Where are the key emerging markets/sectors that people should be looking to in Cambodia that you think will have upside?

This is dependent on the people’s risk appetite, leverage and their own expertise and experience. If they are risk-lover and love speculation, then the purchase and hold of vacant land should be a good upside. If they are an expert in retail markets, then they will look into the retail industry first. On the other hand, if they are risk averse, they can look into investing in existing and well performing commercial buildings etc. Cambodia presents all these kinds of opportunities at the moment.

However, generally, I think the landed affordable housing for average-income people is in steady demand for potential developers to consider. 

Healthcare segment should also be worth looking into. Every year, hundred thousands of Cambodian people are travelling overseas, especially to our neighbouring countries, for medical check and treatment. Quality health care services should be in high demand.

The hospitality sector should be a good bet for investors as more and more foreign tourists and business people arrivals are projected to grow at a double-digit rate and the number increases year after year.

Even though at the moment, retail supply is showing signs of surplus at some locations but the demand will catch up to fill the gap quickly. This is so because the income level of local people is improving, and the demand for high-end shopping will increase. Cambodian teens like shopping for brand products. They usually go to Thailand, Malaysia, and Singapore for the purpose plus vacations.

All said, as an investor, it is always advisable that people need to do more research into the industry they want to enter before committing any capital because as you know real estate is more about location, deal structuring, project uniqueness and reputation of the investors/developers.

Why did you first start working in the property industry?

I started my career in banking, then evolved to fund and investment advisory and finally to this property industry. I like the investment advisory services, not only real estate but other related industries as well. The property market is one of the asset classes that historically perform well compared to other assets and it is also a good investment to hedge against inflation.

What advice would you have for those looking to come into markets like Cambodia and set up business?

With constant annual GDP growth of 7% over the past years and foreseeable future, Cambodia has become a low middle-income country ranked recently by the World Bank and will become an upper middle-income country by 2030. So, the market opportunities are arising more and more.

Regarding the property market, first of all, it is advisable that you need to do some research about the market; the legal framework, demand and supply, other players and their practices and success factors. Setting up a business is not that difficult but the successful operation is. You can do this with the assistance of local legal and real estate experts.

Foreign real estate investors may need to find a good, reliable and honest local partner as you may know foreign individuals or entities could not own land or landed properties in Cambodia. Finally, dependent on your investment objective and strategy, you need to design and structure a project based on that objective and strategy.

How do you best help a buyer or tenant?

As a real estate professional, we know our limits; what we can do and what we can not and should not do. Also as a valuer, we have the advantage of knowing the value of a property compared to other properties in the market. We can advise our clients on the comparable value. By value, I meant we consider not only the price of the property itself but also the other factors such as location, potential growth of the area, value trend, environmental issues etc. in comparison to other properties in the neighbourhood.

For commercial property, we can also be the lead in providing due diligence for buyer/investors/tenant including financial, legal, operational and tax issues and so on by coordinating all local expert team to provide professional and trustworthy results for our clients. In addition, we can also recommend the financing sources.

How do you best help a vendor selling / leasing their property?

As a professional realtor, we should represent only the buyer or the seller. We should not represent both at the same time for the same property. We will work in the best interest of the party we represent. For the seller, depending on his or her timeframe and financial conditions, we will put our best efforts to advise how to maximize their property value by, for example, putting additional improvements and exposing or reaching out to as many potential buyers as possible within the time allowed under the best available terms. This includes the commercial property as well.

In addition, for a commercial property, we can also help develop information memorandum or selling materials that are typically needed in the transaction.

What would you like to see changed in the industry in 5 years?

In 5 years, I would like to see a stronger legal framework and enforcement from the policymakers that can fairly protect all stakeholders involved in the industry. I also would like to see improved professionalism in the industry from practitioners. Equally important, I wish greater attention would be paid to ensuring all real estate transaction processes are transparent and that market data will be openly available to both real estate industry professionals and also the public.

What are some key opportunities in the marketplace at the moment?

As a key country in Belt and Road Initiative, Cambodia will see more developments of physical infrastructures such as airport upgrades and expansion, expressways, connector roads, high ways enlargement etc. Recently, railway lines have been restored and linked to neighbouring Thailand. These developments will surely impact the real estate market.

At the moment, some sub-sectors of the property market are saturated and probably indicating a sign of oversupply. Condo development projects should be more carefully considered because based on estimates, there is a sign of oversupply with projected total supply reaching over 35,000 units by 2020.

Office space grade B or B+ is still in robust demand from local companies and startup entrepreneurs.

Quality healthcare space is also worth looking into.

As local economic growth remains steady and strong, stronger logistics infrastructure such as warehousing and distribution centres are also required to combat the lack of effective delivery systems.

Even though some high-end retail space is experiencing low tenancy, but banking on a higher level of household income and the growth of purchasing power of the young Cambodians who now can make their own earnings, and with good locational analysis, the segment is also worth the study for investment.

What advice do you have for people looking to buy affordable residences in Cambodia?

Buyers should always look into a number of factors when considering buying affordable residences in Cambodia:

• Location and type of property. Of course, affordable housing should only be found in a co-owned building in the central city and those further away from the central city. The location should be convenient for their purpose, close to amenities and convenient for their everyday commuting and especially the security matters of the neighbourhood. It is also dependent on whether it is going to be a landed house or condominium. Again by laws only Cambodian citizen can own land and landed property in Cambodia, while foreigner can own only above-ground property.
   
• Developer’s reputation and track records. Some developers have a very good reputation with many track record. Buyers/investors should also look at the financial capacity of the developer in finishing the project or if they have any backup financiers behind their project. In the past, some developers relied almost all on the pre-sale of their projects for their project funding and we saw a number of un-finished or aborted projects due to this.
   
• Mortgage loan: as a buyer, especially for those whose purchases are for investment purpose, there is some mortgage loan out there for them to leverage. My advice for buyers, and especially for investment purpose, is not to overleverage because the property market in an emerging economy is more volatile than in a mature economy.
   
• Legal papers. As a large investment in their life, buyers should pay more attention to legal papers proving the ownership of the property they wish to purchase. In the past, some developers sold their products to clients while the whole land ownership title is hypothecated with banks for financing their projects. So the buyers must make sure that they will get the certificate of ownership over their property after paying off for the property. A final caveat is for buyers who are not familiar with the local markets to contact and listen to reliable local property experts before buying a property.

Where is demand currently coming from, where is the interest focused at the moment?

Based on our research, while landed housing demand from local people is steadily growing, China is the biggest investor in the condo and mixed-use property market accounting for about 30% of all fixed asset investments in 2017. Most of their projects are located in Phnom Penh, the capital city and Preah Sihanouk, the seaside province of Cambodia.

The demand for condominium mainly come from foreign buyers and mostly are Chinese nationals, followed by Japanese, Korean, Singaporean, while local people account for a smaller share of the condo market.

As mentioned earlier, 2018 is thought to be the year of Retail as seen by the opening of Aeon Shopping Mall 2 and the announcements of other large retail projects both in central city and outskirts of Phnom Penh.

For local players, residential land subdivisions are heating at the moment even though it may come with associated risks for the buyers/investors. Local people drive demand for the vacant land and landed housing or gated housing community (locally known as Borey).

Where do you see Cambodia’s residential market in the next 5 years?

I would say that the fundamentals of the residential market are still the landed affordable housing for local people. Based on data from local authorities, the population of Phnom Penh, the capital city of Cambodia, will reach 8 million by 2030 and the city will need additional 800,000 houses built over the period to accommodate the high growth of people migrated to the city. The population growth will continue to generate the demand for the affordable housing priced below US$100,000 per unit.

Moreover, while currently, local people do not yet get used to living in co-owned buildings like in a condo unit, the trend has started to change. Traffic issues, cleanliness, safety and convenience will make living in a condo in the city centre worth more. The most likely change of this living cultures, coupled with the increasing number of foreign tourists and business travellers, will drive the demand for mid- and lower range condominium units. You will see more and more the kind of co-owned buildings scattered across the city.

For more information about Cambodia's property market, phone or email Sim Hoy Chhoung of Japan Valuers (Cambodia) via the contact details listed below.

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