Investing in Cambodian Real Estate: The Guidelin

  • If you are looking at the overseas property (海外置業)market in Asia, Cambodia is arguably the most open market for foreign property buyers and business owners. Cambodia hasn't suffered a one-year recession in 20 years, skipping the Asian financial crisis of the 1990s, ignoring the tech bubble of the early 2000s, and even outpacing the recent 2008 financial crisis. The reason is that Cambodia, like many frontier markets, has a low correlation with the global economy.

    Cambodia Real Estate Profile
    Cambodia is on the radar of most investors, but that is rapidly changing. Multinational companies such as Samsung, Nike, Toyota and others are operating in Phnom Penh, Cambodia's bustling capital. Foreign investment activity in Cambodia has grown by more than 800% over the past decade, and it appears to be just getting started. Obviously, these factors are positive for Cambodia’s real estate prices and the country’s economy as a whole, and investments are pouring in, realizing Cambodia’s potential.

    But there's a problem: Well-paid expats, often earning six-figure salaries from international companies, struggle to find apartments that meet their standards. Several areas in central Phnom Penh lack quality housing for expats, especially in the central and western parts of the city such as Daun Penh, Chamkarmon and 7 Makara. That means it's possible to buy an old apartment, renovate it, and then rent it out or resell it. Even in 2020, it is still possible to buy a property in Cambodia for $50,000, invest in renovations worth $20,000, and then be valued at over $100,000 on the resale market.

    What is the property tax in Cambodia?
    The annual property tax is 0.1% of the market value of the property over 100,000,000 riel (approximately $25,000). Needless to say, annual taxes in Cambodia are very low and usually do not need to be paid at all. Residents are taxed at 10% rental income, for non-residents, rental income is taxed at a higher rate of 14%, and unused land is taxed annually at 2% of its market value. Because of this, you cannot "land bank" in Cambodia without paying unreasonable taxes.

    Is it safe to buy real estate in Cambodia?
    In a word, be safe! Foreigners enjoy freehold ownership and full control over their property if investing in overseas property in a formal manner. However, it's important to talk to neighbors and review the land office's public records, especially for soft title properties. Make sure the property you are buying has no other claims. Although rare, it's not unheard of for people to sell mortgages or other disputed properties, and it can easily be avoided with proper due diligence. Equally important, foreigners cannot legally own soft or hard property rights in their own name, only stratified property rights. If you do not wish to form a real estate holding company, your only option is to find a local agent to hold the property on your behalf and bind him/her through several contracts, you may need the help of overseas property consultants (海外置業顧問)and lawyers in the process .

     

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