Cambodia tends to fly under the radar in the world of foreign investment. Many tend to think of it as a small, war-torn country that lags behind its neighbors in population, wealth, and development.
However, this frontier market is actually one of the best places in Asia for real estate investors. Its economy is small but resilient, and the country hasn’t experienced a recession in over 20 years.
The city also attracts expats with its lively street markets, stunning French architecture, and historic temples. Given this appeal, savvy investors have begun to flock to Phnom Penh for profitable real estate at shockingly low prices.
Foreigners typically purchase two types of property – shophouse apartments and condos. Shophouse apartments typically can be renovated, rented, and resold for a hearty return. Condos, on the other hand, aren’t as profitable, but they’re easier to own and maintain.
For that reason, this guide focuses on condominium units – not other types of property. For more information on shophouses or land, check out our general guide to Cambodian property.
Foreign Property Ownership in Cambodia
Cambodia is one of the few countries in Southeast Asia that makes owning property as a foreigner relatively simple. In fact, it’s arguably the most welcoming country for international investors in the entire region.
Entering Cambodia and setting up a business there is simple and efficient. Year-long visas cost only $250 and a few days, and Cambodian businesses can have 100% foreign ownership.
Additionally, Cambodia uses a mix of “hard” and “soft” titles for land and buildings. Hard titles are officially entered into the national government land registry. Soft titles, on the other hand, are registered with the local government.
How Much Does a Phnom Penh Condo Cost?
To an outside investor, condos in Phnom Penh seem relatively cheap. Mid-range units average $2,600 per square meter while luxury ones typically cost $3,250 per square meter.
As always, prices vary by location. In central areas like Daun Penh, units may cost upwards of $200,000. On the other hand, condos on the outskirts of the city may be well under $100,000.
$200,000 for a central location in an up-and-coming city doesn’t seem half bad. However, when compared to other properties in the city, condominiums in Phnom Penh are overpriced. Shophouse apartments often cost far less, and they have far more investment potential.
This goes doubly for mid-range condos since this sector is the most oversupplied. In fact, a mid-range unit in Phnom Penh costs roughly the same as in Bangkok. Comparatively, luxury units in Phnom Penh are half the price of comparable ones in Bangkok.
Buying a condo in Phnom Penh is thus relatively affordable, but it isn’t the greatest investment. If you do choose to buy one, you should consider a luxury unit in an up-and-coming area for maximum returns.
Property Taxes and Fees
As an investor-friendly country, Cambodia’s taxes are generally low. The country’s annual property tax sits at 0.1% of the property’s market value that exceeds 100,000,000 Khmer riel, or $25,000.
Likewise, rental income is only taxed at 10% for residents and 14% for non-residents. Plenty of deductions also apply, lowering that amount further.
Others, such as a 2% levy on land owners, generally do not apply to condo buyers or foreigners.
Cambodian taxes are relatively low and, in some cases, rarely enforced. Many locals do not even register to pay. I personally don’t condone avoiding taxes, but that’s the reality on the ground.
Property Developers and Agents
Cambodia is an emerging market, which presents unique challenges to real estate investors. Language barriers, government bureaucracy, and shady developers can complicate buying Cambodian real estate.
Therefore, as a foreigner, hiring a real estate agent in Phnom Penh is often essential. Realtors will translate and deal with the local government for you, which can be difficult if you don’t know Khmer or local customs.
Whether or not you use an agent, you should carefully research the developer that you plan to buy from. As in other frontier markets, you only want to buy from those with a proven track record of high-quality work.
Some of the best property developers in Phnom Penh include Creed Asia, Borey Peng Huoth Group, and Shukaku.
Should I Buy a Condo or a Shophouse Apartment?
Foreigners looking to invest in Phnom Penh property often consider two options – a standard condo or a shophouse apartment.
As I mentioned previously, Phnom Penh condos can be overpriced. In some areas, the market is even oversaturated. Condominiums don’t always get the best returns – especially compared to what you can earn from renovating a shophouse apartment.
Unrenovated units in old colonial buildings can be half the price and twice the size of a new condo. If you’re willing to put in some additional work (legal and otherwise), you can make hefty returns from renting or selling a renovated shophouse apartment.
However, Cambodia’s foreign ownership laws make buying shophouses more difficult compared to condominiums. Foreigners can own condos outright, but to own other property, they must have a land holding company.
Given that red tape, you should consider whether you’re looking for a residence or an investment. Shophouses require time, effort, and commitment to purchase and renovate. Condos may yield lower returns, but they’re much easier to buy and own as a foreigner.
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