Phnom Penh -- the city the Khmer Rouge emptied in 1975 – is now a sprawling urban center of 1.7 million people whose skyline could soon be unrecognizable as a slate of skyscrapers are either planned or under construction – and possibly just in time for a rude property shock in a market characterized by bad planning and onslaughts against the poor.
They include projects like Diamond Island Riviera condominium on Koh Pich, an island emerging from the muddy waters of the Tonle Sap. Inspired by Singapore's Marina Bay Sands Resort, Cambodia's version will feature three 38-storey towers topped by a 200 meter-long swimming pool.
Not too impressive, at least when compared to the 133-storey Thai Boon Roong Twin Trade Center, to be built in the middle of Phnom Penh by the eponymous Thai Boon Roong Group, which used to be headed by Teng Bunma, a notorious tycoon allegedly involved in the drug trade. Teng died in July, but the project his company is spearheading could soon become the tallest building in ASEAN and one of the top 10 in the world.
The flurry of activity in Phnom Penh's property market partly reflects Cambodia's economic ascent despite a clearly despotic government. It also raises the shadow of the so-called Skyscraper Index, put forward in 1999 by property analyst Andrew Lawrence in Hong Kong, which correlates the rise of outlandishly tall skyscrapers with economic downturns. There are serious concerns about Phnom Penh's urbanization, beginning with the economic profitability of its new mammoths.
The country's GDP annual growth rate averaged 7.6 percent from 1994 until 2016, and according to a study published by the World Bank last year, Cambodia's urban spatial expansion rate averaged 4.3 percent a year between 2000 and 2010, the second fastest in East Asia after Laos.
“With sustained GDP growth, low barriers to entry and an ever-growing international profile, the Cambodian property market continues to attract interest from local and foreign investors,” said James Hodge, the Head of Professional Services at CBRE Cambodia, a branch of the US real estate consultancy.
In its latest report, CBRE predicted that an additional 22,464 condominium units will come online by the end of 2018 – a whopping 806 percent increase from this year. The sheer amount of new space being created warrants the question whether the market will be able to swallow it, with analysts saying bubbles may appear.
“It is worth noting that supply in the high-end/luxury segment is relatively high despite limited local demand,” Hodge wrote in an email. “We believe that there is still room for residential development. However, we suggest that any future development employ greater caution.”
If it is anything to go by, Phnom Penh's only fully built skyscraper, the 187 meter-high Vattanac Capital tower, is proving something of a disappointment. The Guardian reported last year that occupancy was below 30 percent and on visits this month, its shopping mall turned out to be as glittering as it was empty, with shopkeepers and waiters outnumbering customers.
Nor is it clear whether the majority of Cambodians will be able to take advantage of such projects. Luxury homes are a privilege for a small part of the local population, as well as for affluent foreigners. Overseas investors – especially from more developed Asian countries like South Korea, Japan and China, Hodge said, have taken interest in Cambodia because yields there are high. Many buy condos simply to park their money, rather than to occupy their properties.
“The trend towards foreign ownership is particularly true in the mid and high end market segments where in many instances we have witnessed between 60 percent and 70 percent of pre-sale purchasers originating from outside Cambodia,” says Mr. Hodge.
Things are very different when seen from the other end of the social spectrum. As Cambodia hops on the train of the Asian economic miracle, many of its urban poors are finding themselves squeezed out of their homes.
“Right now Cambodia's per capita GDP is only a bit more than US$1,000 per year, so how can people buy expensive condos?” asked Sia Phearum, the executive director of the Housing Rights Task Force (HRTF), a local NGO working with dispossessed communities. “I think these big buildings will affect the people, because the poor do not have a chance to live in the middle of the city.”
Is important for companies to respect residents' rights, Sia argued. But past experience is not encouraging - in many cases, locals have been literally pushed aside by developers.
Just northwest of the Vattanac Center, a massive sand pit filled by weeds covers dozens of hectares of land. The barren construction site is what remains of the Boeung Kak lake, formerly the country's largest urban lake. An area famous for its backpacker haunts, cheap restaurants and the sunsets one could admire from the lake's shores, it was home to about 4,000 families.
In 2007, the authorities leased 133 hectares of land at a cost of US$79 million to Shukaku Inc. - a company owned by Lao Meng Khin, chairman of the Cambodian Chamber of Commerce and a senator from the ruling Cambodian People's Party (CPP) - to develop the area as a fancy neighborhood, leading to what Amnesty International said could be the biggest forced eviction in post-war Cambodia.
Nearly all of the families had to pack as the lake was filled with sand. Numerous protests erupted over time and in 2011 the World Bank stopped loans to Cambodia over the eviction row - but none of this has made much difference. While the bank has restarted its loan program this year and locals are still protesting, no development has materialized. All that has been built are a couple of rows of unfinished condos and a sport center named Central Park, awkwardly planted in the middle of the swampy site.
Just as well-known is the Borei Keila case in central Phnom Penh. In 2012, 1776 families were evicted from the poor neighborhood to allow Phanimex, a construction company, to develop the area. Locals were supposed to be compensated with ten new buildings, but the company built only eight, leaving over a hundred families out in the cold.
In both cases, Phnom Penh's much awaited urban development, with its glittering towers and exuberant rhetoric, has turned out to be more controversial than a simple, happy-ending story. Local residents were forced to pay a steep price for it, largely without being able to fight back.
“In the Borei Keila case they filed a complaint, but the court ignored it. In the Boeung Kak case, the protesters filed a complain after being attacked by thugs in 2012, but the court did not take action,” Sia said.