Cambodia's construction and real estate sectors are expected to experience a slow recovery in 2025, following the economic downturn.
Key forecasts and challenges
The construction sector is forecast to grow by approximately 2.5%, while the real estate sector is expected to expand by around 2.6% in 2025. However, other forecasts indicate even lower growth rates, with the construction sector projected to rise by 1.1% and real estate by 1.2% in 2024. Nevertheless, some reports suggest higher growth potential in 2025.
The sectors face challenges such as subdued construction and real estate activities, limited foreign investment inflows, and rising non-performing loans, and the recovery is further complicated by a sharp slowdown in credit growth, which has exposed the economy to increased financial sector vulnerabilities.
There is a growing trend towards industrial real estate, with increased demand for land to build factories and special economic zones, driven partly by geopolitical tensions. In contrast, residential property demand is expected to remain stable, with prices likely to remain steady.Cambodia's overall economic growth is projected to reach about 6.3% in 2025, driven by advancements in the industrial, service, and agricultural sectors. However, the recovery remains uneven, with external demand playing a significant role in GDP growth.
Policy Initiatives
The government has introduced measures to address the real estate and construction downturn, including tax incentives for first-time homebuyers and the formation of a working group to support affordable housing development.
Monetary policy is expected to focus on ensuring financial stability and supporting de-dollarization, with a need to phase out forbearance measures to limit potential debt risks.
Overall, while there are signs of gradual recovery, the construction and real estate sectors in Cambodia face significant challenges in 2025, necessitating strategic investments and policy support to stimulate growth.
Foreign investment plays a crucial role in the recovery of Cambodia's construction and real estate sectors by contributing to economic growth, job creation, and infrastructure development. Here are some key aspects of how foreign investment impacts these sectors:
Role of foreign investment
Foreign direct investment (FDI) has significantly contributed to Cambodia's economic growth, with real estate FDI increasing by 53% in 2021 to $3.4 billion, marking the highest level since 2013. This growth has created new opportunities for businesses and investors in the real estate sector.
Increased foreign investment has led to job opportunities in sectors such as construction and real estate, enhancing employment rates and contributing to improved living standards.
Foreign investment has driven the development of essential infrastructure, including roads, airports, ports, and power plants, which supports the growth of the construction and real estate sectors.
Cambodia's relatively affordable property prices, favorable tax environment, and supportive business policies make it an attractive destination for foreign investors. The government's efforts to streamline investment procedures and offer incentives further enhance its appeal.
Challenges and opportunities
Despite the positive impact of foreign investment, the recovery of Cambodia's construction and real estate sectors remains slow due to factors like oversupply, low demand, and economic pressures.
The growing middle class and expanding industrial sector present opportunities for foreign investors, particularly in affordable housing and industrial projects. The government's commitment to economic reforms and infrastructure development also supports future growth.
In summary, foreign investment is vital for stimulating growth in Cambodia's construction and real estate sectors by fostering economic development, creating jobs, and enhancing infrastructure. However, addressing current challenges will be crucial for maximizing these benefits.
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