Cambodia debates foreign property ownership

Saturday, April 3, 2010

April 2 2010
By Elaine Moore in Phnom Penh
Financial Times

Cambodia is hoping to court international investment by relaxing laws on property ownership by foreigners in a bid to counter property prices that have fallen as much as 40 per cent in the wake of the global recession.

Cambodia’s draft law – which echoes an Indonesian move this week to review foreign ownership rules to draw investors to its property market – is currently under discussion at the National Assembly and would allow non-nationals to fully own residential apartments on the first floor and above for the first time.

The first-floor rule, which is also likely to be part of the Indonesian review, skirts sensitive political and legal issues.

The topic of land and property ownership is particularly sensitive in Cambodia where all land deeds were destroyed by the communist Khmer Rouge regime in the 1970s. Proprietary disputes are frequent as a result.

While resorts such as Phuket and Bali remain the most popular destinations for foreigners looking to purchase a holiday home in south-east Asia, Cambodia’s lawmakers hope that deregulation will lead to increased foreign investment in the country and help to pick the Cambodian property market out of the doldrums.

Unrestricted ownership of property by foreigners is uncommon in south-east Asia. In Thailand foreigners are permitted to own a condominium as long as the total foreign ownership of the building does not exceed 49 per cent.

However, investors interested in property in countries such as Laos and Vietnam can only purchase leases. In Cambodia, foreigners can either lease property or they can choose to set up a purchasing landholding company with a national citizen in which they have a minority shareholding.

But with property prices under pressure across Asia, a number of countries have begun to consider liberalising property laws to encourage greater overseas interest.

In November 2009, Vietnam clarified its foreign investment laws, which allow non-residents to lease apartments for up to 50 years.

Edwin Vanderbruggen, director of tax advisory group DFDL Mekong, said the changes to Cambodia’s property law would make it an attractive prospect in the region.

Daniel Parkes, Cambodian manager of property advisors CB Richard Ellis, which recently opened its first Cambodian office, said that new developments along the pristine beaches of Cambodia’s so-called Indochina Riviera, including islands such as Koh Rong, could be among the beneficiaries of the law change.

The country experienced a real estate boom between 2006 and 2008, when prices in some areas of the capital city, Phnom Penh, rose tenfold. The subsequent recession pushed prices down by up to 40 per cent and the situation has now stabilised, according to Mr Sung Bonna, chief executive of Bonna Realty Group, the largest estate agent in Cambodia.

Residential property in Phnom Penh’s French colonial centre costs on average $1,600 per square metre, while prime locations fetch around $2,700 per square metre.


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