Why Phnom Penh is Southeast Asia’s New Real Estate Hotspot

Phnom Penh – Cambodia’s Growing Metropolis

Phnom Penh, the capital of Cambodia, is a growing urban center with a population of 2.4 million. As an emerging market, the city presents a wide range of opportunities for real estate investors. Its diverse landscape, rapid modernization, and strategic location make it a prime destination for real estate investment.

Affordability and Growth Potential

One of Phnom Penh’s key advantages for investors is its affordability. The cost of living, doing business, and acquiring property is significantly lower compared to other regional capitals, yet it still offers attractive returns. The city’s economic growth, coupled with ongoing infrastructure developments, positions it as an emerging market with strong potential for capital appreciation. According to a 2024 World Bank Report, Cambodia’s economic growth is noted as ‘one of the fastest-growing economies in the world,’ averaging an annual rate of 7.6% over the past two decades. A comparative view of GDP growth versus a wide spectrum of other countries (see Fig. 1, below) highlights this extremely strong growth, with the vast majority of economic output emanating from Phnom Penh and its hinterland.

In Phnom Penh, investors can find opportunities across a range of real estate assets, from high-end residential developments and commercial spaces to affordable housing projects and hospitality ventures. Phnom Penh offers something for every investment strategy, whether targeting short-term rental income or long-term capital gains.

Modernizing Infrastructure and Expanding Market

The city’s ongoing modernization is evident with the construction of new shopping centers, hotels, and residential buildings, creating numerous opportunities for investors. The government is actively investing in infrastructure improvements, including better roads and public services, enhancing the city’s accessibility and appeal. These developments are driving demand for new real estate, from high-end residential units to affordable housing for the growing population. With 65% of the population under the age of 30 and urbanization rates comparatively low (25% versus Vietnam’s >40% and Thailand’s >50%), real estate demand is set to surge in the coming decade. New high-quality condominium projects are being developed to meet this demand but pricing is still extremely competitive when compared to a whole plethora of Asian and global capital cities as shown in Fig. 2, below. There is great value and capital appreciation potential in Phnom Penh.

Phnom Penh is becoming a popular destination for expatriates, attracted by the city’s relatively low cost of living, vibrant cultural scene, and modern conveniences. This trend is driving demand in the rental market, with luxury apartments and condos particularly appealing to foreign professionals.

For investors, this means the potential for steady rental income and property appreciation as the city continues to attract more foreign residents. In tandem with the upward economic trajectory of young local professionals, these expats provide substantial additional rental demand and rental yields on condominiums in Phnom Penh are amongst the highest in Asia and beyond. (see Fig. 3, below)

Architectural Diversity and Real Estate Appeal

Phnom Penh is a unique blend of Traditional Khmer, French Colonial, and Modern Contemporary architectural styles, which gives it a distinct identity. Key landmarks, such as the Royal Palace, Central Market, and the Vattanac Capital Tower, symbolize its rich cultural history and rapid modernization.

This architectural diversity reflects the city’s rich history and dynamic future. Investors have the option to focus on restoration of older properties in the city’s historic districts or invest in modern developments in newer parts of the city, catering to different market segments.

Strategic Location and Economic Growth

Phnom Penh’s location at the confluence of the Tonle Sap and Mekong rivers positions it as a strategic hub for trade and commerce in Southeast Asia. Its growing influence within the region is further supported by its expanding transportation network, including international flight connections and plans for future public transit systems.

This ensures ongoing demand for commercial spaces; especially as more multinational companies establish regional offices in the city. The ongoing influx of foreign direct investment (FDI) into Cambodia further strengthens the city’s real estate market, providing opportunities in both the residential and commercial sectors.

Prime Investment Neighborhoods

Several neighborhoods in Phnom Penh stand out as prime areas for real estate investment. BKK1, Tonle Bassac, Toul Tom Poung, and Tuol Kork are popular with expatriates and locals alike, offering a mix of residential and commercial properties. These neighborhoods are experiencing significant growth, with increasing demand for both rental properties and new developments.