Buying A Finished vs Off-Plan Condo In Cambodia

We recently wrote about the most affordable and valuable areas for property in Phnom Penh, and overall, the property market sentiment is confident in 2023.

Developers have indicated the return of interest from foreign buyers from several countries such as Hong Kong, Japan, Singapore, and China - and the country’s recent removal from the FATF grey list also suggests there is renewed confidence for investing in the Kingdom. 

So if you are looking to invest in property and a condo, as always do your due diligence, but the information below might be timely.

Are You Planning On Investing In A Finished Condo Or An Off-Plan Condo – Which One Is Better?

Off-plan property buying, needless to say, is when the property is purchased prior to its construction being completed. Buyers can view the design and construction plans but the physical property is yet to be handed over (completed). 

The main benefits of buying off-plan is the opportunity to secure properties at the best price and on flexible payment terms. Buying early also means the chance to select the best units (most desirable) with the option of adding customisations to the property.

Buying off-plan is typically a great investment opportunity given future capital appreciation and attracting higher rental returns based on it being a new property.   

The signed contract is based on the agreed price of the property as per the architectural specifications, plus any additions or changes. A small booking fee is required to secure the unit, followed by a deposit after signing the sales and purchase agreement (SPA). 

Buyers will also settle payment terms with the developer prior to purchasing the property. Typical payment terms can be staged payments over the construction period, or staged payments based on construction milestones. Typically, the higher amount a buyer pays upfront, the better the price they will be able to secure for the unit.  

When you buy a completed condo, you can move in right away without having to wait for construction to be completed. Buyers can also walk through the unit and see exactly what they are buying, allowing the purchaser to make a much more informed decision. 

In Cambodia, home loans are also typically more accessible once a condominium is complete. 

In a market like Cambodia's, it is highly advised to use a licensed property advisor throughout the whole process. Visit realestate.com.kh who works with all the licensed brokers in the market. 

Advantages & Risks Of Buying Off-Plan Condos In Cambodia

• Affordability & Payment Terms: Off-plan properties are usually more affordable than buying units that are ready for occupancy. Buyers could be provided with extra privileges such as a smaller down payment and more flexible payment terms.
• Great Investments: This could be fantastic profitability as new condos in Cambodia also yield higher rental returns. Property value appreciation ranges between 5-8% (depending on location, and type of development) per annum for Phnom Penh real estate, hence, first-comers usually enjoy the appreciation when they invest in an off-plan project.
• Move-In Date Uncertainty - A delay in property completion is a risk. Contracts will include delay clauses (grace period) that free the developer from responsibility for a period of time.
• Changes In Building Plan - The final product may differ from what was initially expected.
• Market Fluctuations - Based on the state of the market, the value of the properties may decrease before it is completed.
• Financial Risk - If a developer does cease operations and go bankrupt or if the project doesn’t get completed - you might be left with nothing. 

Buying Finished Condos - Pros And Cons

• Mitigate Risk - The property is complete, so you can actually view what you are buying leaving little room for unexpected surprises and this mitigate risks.
• Property Prices - In some cases, very popular properties might sell all units before the handover, so if you were interested, you might need to purchase a resale unit from the owner which is usually at a higher price. Compared to off-plan properties, payment terms might require a full cash payment or a maximum installment.
• Access To Home Loans - Banks will be more likely to lend on a completed property as opposed to off-plan properties, although foreign investors will rarely be eligible for a home loan in Cambodia.
• Property Value & Rental Yield - Waiting to buy a completed condo does offer some assurance, but probably less value appreciation compared to buying off-plan. Older properties in Cambodia typically are leased out for a lower price compared to new properties.

Three Items That Should Be On Your Checklist 

1. Look for developers with a good reputation or reputable agents - Check the legitimacy of the developer with related government agencies and ministries such as the Ministry of Land Management Urban Planning and Construction.
2. The developer hands over the keys on completion of the property but you should ensure there is a warranty and defects period included in the contract.
3. Get professionals involved - a reliable lawyer/property specialist to check the contract for any inconsistencies or dubious clauses & obtain the services of licensed brokers to assist you with the process if needed.

Cambodia Property Survey 2023 - Buyers' Sentiment

The soon-to-be-released Realestate.com.kh Cambodia Real Estate Survey 2023 saw more than 2000 respondents at the start of 2023 provide their sentiments on the property market in Cambodia.

In general, those who completed the survey are mid-high net worth individuals (who can afford to buy a property) so the survey represents a higher combined family income in Cambodia than is normal as well as potential foreign investors. 

The main takeaways on their feeling towards condos and buying off-plan or a finished unit were:

• Increased popularity in studio and one-bedroom condominium units in Phnom Penh overall.
• Condominiums/apartments remain the second most popular of all property types (after land - but this is more challenging for foreigners) - so among only foreign respondents, two-thirds indicated a condo as their top property choice.
• Respondents are more confident in buying in a condominium that is complete or nearing completion - Nearly twice as many preferred to invest in a condo that was ready to move into over an unfinished condo development.
• Among only Cambodian respondents, the number was fairly equal in buying off-plan or a finished condo, so this is a greater concern for foreign buyers (with a ratio of nearly 3:1 preferring completed condos).

In addition, nearly two-thirds who responded to the aforementioned survey feel that property prices will increase over the next year, so timing might be everything.

But ensuring you purchase an investment from reputable developers, and having your documents and obligations checked by professionals in the real estate sector is mandatory if you want to buy confidently in the market and avoid unexpected surprises.