One of the biggest investments that people can make is real estate—since it stands the test of time and only appreciates. However, whether you’ve previously invested in Cambodia real estate or not, it’s apparent that their prices can balloon up fairly quickly over the years. While lower market prices exist at times, there are many factors driving not only real estate prices, but also demand and supply.
Not knowing what factors affect the real estate market can be difficult, whether you’re new to investing or not, so continue reading…
1. Economy
One of the most vital driving forces to the real estate market is the economy of the country. After all, when an economy is stable and investors see great profits in different industries, they’ll come flocking in. When they do, the real estate market will also see higher supplies, better quality real estate projects, and more local and foreign investors.
While there are many indicators of a stable economy, a few of the signs are high employment in the country, increasing wage, a stable inflation and the interest rates continue to increase.
2. Government policies
Amid other factors, one of the forces that drive the real estate market are government policies since they help in improving the industry. For example, if the government sets up appealing regulations that help exempt or deduct taxes following strict requirements, then it helps investors continue to invest more in the industry and other markets. After all, investors are looking for a way to grow their portfolio and if the local policies restrict their opportunity for growth, they would look at other countries’ markets instead.
3. Interest rates: For property and loans
It’s common for buyers and investors to look at interest rates, whether they’re buying their first, second, or more property. However, if the interest rates on both property and loans skyrocket too high, there will be less demand. In this case, the government can’t set up unimaginable interest rates on loans, since if they do, there would be less buyers who would buy a property. This would then lead to more real estate supply, which will not be good for the market in the long run since property value can depreciate.
4. Country’s demographics
Considering that what makes the real estate market are the investors, home owners, and those in business, one of the biggest factors are the country’s demographics. The population, age, and other characteristics of those who live in a certain area of the market and more, can largely affect demand and supply. After all, we have to consider the purchasing power of the country’s demographics since if they have a good salary or profit as a whole, the market will be rich with investors.
5. Country’s budget
Following the factors mentioned above, one of the biggest factors that drives the real estate market is the budget that the country has. Since the country’s budget determines how much property materials cost, it ultimately helps determine the property’s value once it’s developed—whether it’s too high or priced fairly according to the market.
For example, if Cambodia has a large budget for the fiscal year, then it’s possible to reduce interest rates as well as lower the costs of materials—all without pricing it to the point of deficit for the economy.
6. External investors
Besides first time home owners, the biggest backer that pushes the real estate market to grow yearly are the investors. These investors can be Cambodian residents, determining which development projects they need to launch or what type of property they can add to their portfolio. However, a critical determining factor of the real estate market are investors located around the world who want to invest in a project or two in Cambodia.
The more external investors that a country has, whether it’s for the real estate industry or not, brings more development projects forward that will improve the economy. For the real estate industry, this can be anywhere from commercial to residential projects that will benefit the residents and its locale for the long run.
7. Market trust
While there are many factors that can affect how many investors are putting their money into the real estate industry, as well as the projects in development, one thing needs to be guaranteed: investors should trust the market. In this regard, it simply means that investors can trust that the money they put into a project, property, or more, will only lead to profits after a certain period.
If investors or buyers determine that the market is unstable, due to any of the factors above not being stable, it’s likely that the industry will suffer losses. This is true as well for the different construction companies in Cambodia, where they need to produce consistently high-quality work. Otherwise, if investors see that numerous construction firms in the country develop buildings that aren’t safe, there would be fewer investors; thus, slowing down real estate market growth.
8. Employment opportunities
A great sign of a stable economy is that there are plenty of employment opportunities in different fields. Following this, it’s also a driving factor for the real estate industry since if the ratio of employed people in the country is high, it also means that the purchasing power of the majority is high. This then equals more investors in real estate.
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KH