Guide to buying property in Cambodia for foreigners

FOREIGNERS OWNERSHIP INFORMATION IN SUMMARY

Foreigners are allowed to buy property in Cambodia, condominiums, apartments, or offices, as long as it is not located on the ground floor of a building and at least 30% of the other properties in the building are Cambodian owned (quota).
To purchase property in Cambodia all you need is a current passport and visa. However, we would strongly recommend that you have someone advise you through the process, such as a real estate agent or a lawyer.
It is important to conduct a title search before purchasing property. We can help you with this. Feel free to contact us.

Although Cambodian law prohibits foreigners from owning land, there are some possibilities. If you are interested, please contact us.

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Cambodia has one of the fastest growing economies in Asia and risk-taking real estate investors have done well in the past 10 years.

It is also one of the last countries in Southeast Asia where it is still relatively easy to start a business. That said, as one of the last border markets in Asia, it is not always easy to navigate.

Before venturing into the real estate market and considering investing in Cambodia, you should learn about property opportunities for foreigners, what options you have, where it’s more attractive to buy property, and of course more.

In this article, we review the following topics:

Are foreigners allowed to buy real estate in Cambodia?

Cambodian property regulations are very similar to property laws in Thailand and many other Southeast Asian countries. In Cambodia, foreign buyers can only obtain full ownership of condominiums and are not legally allowed to own land.

As stated in Article 16 of the “Amended Law on Investment”, persons with Cambodian citizenship or Cambodian entities are entitled to own land. It is as clear as that. That said, there are ways for foreigners to purchase or at least control the ownership of land.

Buying Land in Cambodia

You have four different ways to buy land in Cambodia. The process is not without risk, nor is it simple if you have little knowledge of the Cambodian real estate market.

That’s why it’s highly recommended to get a real estate lawyer and a reputable real estate agent to advise and assist you throughout the buying process.

Let’s look at the 4 different options you have when buying land as a foreigner.

1. Buying land through a Cambodian company

This is probably the safest option for buying land in Cambodia. It is also often recommended in other countries, for example in Indonesia. Keep in mind that the option of setting up a company obviously requires some capital and time.

Since foreigners can only own a maximum of 49% of a company’s shares, make sure you set up the company with partners you trust. Even if you are a minority shareholder in the company, you will be able to control the ownership of the property through various contractual arrangements.

Of course, it is important to do your due diligence and hire a real estate lawyer to help you through the process.

2. Establish a long-term rental contract or Leasehold agreement

Foreign buyers can lease land for a period of 15 to 50 years.

In some cases, it is possible to extend the lease to 50 years. If the Cambodian government owns the land, the maximum contract (lease) term is 40 years.

Keep in mind that one of the priorities before entering into a lease agreement with a landowner is to check the title deed.

The title of the property includes information regarding:

  • Your rights to control the property
  • Your rights to sell or lease the property
  • The existence of any encumbrances or mortgages on the property

Conduct a title search

You should conduct a title search to verify who owns the property and whether there are any encumbrances registered against it.

To protect your purchase, you could, for example, add a paragraph to your rental agreement (lease) stating that you, as the tenant, must give your consent to any sale of the property.

In addition, you can register a “notice of block sale” with the land registry office. With this, they can block any sale of the land unless you have authorized it.

3. Buying land by obtaining Cambodian nationality

This option is one of the least interesting because it is undoubtedly the most difficult and time consuming.

If you want to obtain Cambodian nationality, you have two options:

  • Reside in Cambodia for at least 7 years and demonstrate a perfect command of the Khmer language.
  • Make a donation or a significant investment
  • And on top of that the Prime Minister must approve any application for citizenship, which is quite rare.

4. Buying land with a Cambodian citizen

Buying land using a local nominee is a common option for foreign buyers.

Simply put, buying through a Cambodian nominee means that you sign a trust agreement with a Cambodian citizen, which gives you full rights to control the land.

Usually, the landowner mortgages the land and leases it to you as an investor. Many other documents, usually called “nominee security contracts”, need to be drawn up.

These contracts will set out your rights to control the land, and minimize the risk that the nominee sell, transfer or lease the land to another person.

Is it safe to buy a property with the help of a Cambodian nominee?

This is not safe and not advisable for several reasons.

First, this method is not allowed by the government. It can lead to a scenario where the government confiscates your land or forces you to sell it. Of course, in many cases the authorities will tolerate this, but you never know what will happen later.

Second, you run the risk that the nominee will “run away” or claim full ownership of the land. Circumventing the law by means of risky contractual arrangements is not without risk.

Moreover, there is no guarantee that you will have any say in the matter if you decide to go to a local court.

Obtaining Cambodian Land Titles

Before investing in real estate in Cambodia, you need to know in depth the different land titles.

There are currently four different titles:

  • Soft titles
  • Hard titles
  • Strata Titles
  • LMAP

One point to mention first is that foreigners cannot legally own land with soft titles unless the property is held with a strata title.

Cambodia-Land-Title-Deed
Cambodia Land Title

What is a strata title?

Strata titles are used for condominiums, where units are individually owned on a freehold basis.

Owners of these units share common areas such as: fitness rooms, swimming pools, barbecue areas, children’s playgrounds, etc.

As a condo owner you must pay a monthly management fee to cover the costs of managing the condominium. You can buy a unit in a condominium that has a soft title as long as it is registered in a building with a Strata title.

What are the differences between soft titles and hard titles?

Soft titles are recognized and registered at the local land registry level, while hard title is registered at the national level (which is preferable).

Nevertheless, soft titles have been widely preferred and most often used. Currently, about 70% of properties in major cities have soft titles, while this figure reaches 80% in rural areas.

Benefits with Soft Titles

If you buy a property with a soft title, the transfer process will be faster and easier. In addition, you can avoid the 4% transfer tax that applies to hard-titled properties.

Drawback with Soft Titles

There is one major disadvantage if you decide to purchase a property with a soft title; you cannot obtain a mortgage and there will be less information about the property and its previous owners.

Benefits with Hard Titles

Hard titles are increasingly available to foreign buyers and have many advantages, including better protection and more information about the previous owner.

What is LMAP?

LMAP stands for Land Management and Administration Projects and is the most secure and transparent option for land ownership.

The World Bank launched the LMAP project in 2002, with the main objective of using an efficient system to register properties and protect local owners.

By using an efficient and transparent system to register land, the country can avoid the problems of involuntary eviction and land grabbing that frequently occurred in the past.

The process of buying real estate in Cambodia

Before buying a property, it is important to know the process and the different steps.

Let’s take a look at the different steps involved in buying a property on the secondary market.

Doing a Title Search

Once you have found a suitable property with the help of a real estate agent, you need to do a title search.

As explained earlier, it is important to make sure that there are no encumbrances attached to the property and to check who the previous owners are.

Contact the Local Commune Council

In addition to checking the title of the property, go to your local council and ask for more information about the property. The first communal council was elected in 2002. In short, it consists of 5 to 11 people and is responsible for working on infrastructure development, health services and environmental protection, among other things.

Be sure to get a copy of the identification of the person acting on behalf of the company selling the property, in case you are buying the property from a company (not a private person).

This person must be authorized to present the selling company to the Land Registry Office. Ask for the documents that prove this. The Ministry of Commerce should have issued a certificate before. Make sure you receive an authentic copy of this certificate.

Paying the Deposit

Once you have found a property that meets your criteria, you must prepare a deposit equivalent to 10% of the property’s value.

At this point, you have already managed most of the steps in the process. The next step is for you and the seller to go to the land registry office and receive the necessary documents for the transaction.

Before the Khan can transfer your name onto the title deed, the seller must present the original title document, called the deed.
Generally, the land registry office needs one month to prepare the documents, signed and ready to be submitted.

Payment of the Transfer Tax

Once you have received the documents from the Land Registry Office, you must go to the General Tax Office, which will take care of the payment of the transfer tax.

The seller will accompany you for another visit to the Land Registry Office to sign the purchase contract. Don’t forget to bring the receipt you received when you paid the transfer tax, as you will be asked for it.

After approximately 5 business days, the Land Registry Office will send the final documents to the Municipal Land Office, which will in turn issue a Certificate of Title in your name.

It may take up to 3 weeks to receive the final documents.

Buying Condos in Cambodia

Some investors have managed to acquire and control land through local companies or nominee structures.

But the easiest and safest option for foreigners is to buy condominium units or commercial properties that have a condominium title.

Freehold apartments come with a condominium title, which means that you will have full ownership of the property.

New-Apartments-For-Sale-at-Golf-Harmony-Cambodia
Golf Harmony Condominium Apartments Residence in Kampot For Sale

What are the advantages of buying an apartment (condo)?

First of all, condominiums are maintained by specialized property management companies.

You can be on the other side of the world while someone manages the rentals and any repairs for you with no problem. Not to mention that condominiums have 24/7 security and many of the amenities that many foreigners look for.

Important to note:

  • Rental yields can be high
  • You can use US dollars for real estate transactions
  • Apartments are significantly less expensive than in Western countries
  • You own the unit outright without having to take risks with risky contracts

Some foreigners sometimes talk about the advantages of buying commercial buildings (shophouses) in Cambodia. Even though these commercial buildings offer a few percent higher returns than apartments, the majority of foreign buyers prefer condos.

This type of person tends to live in apartments in more developed countries and cities. They simply do not live up to their claims.

Future developments will be dedicated to condominiums

The Cambodian government is rapidly replacing old buildings with new condominiums and commercial buildings. A similar transformation was seen in Shanghai ten years ago.

An article in Bloomberg mention this in 2018:

“Now, a city (Phnom Penh) once known for its French colonial villas and modernist “New Khmer Architecture” in the 1960s is becoming unrecognizable. Heritage structures are being replaced with expensive high-rise condominiums in a city where the median household income is only around $11,000 per year.”

Future development will be dedicated to new condos, commercial buildings, and infrastructural projects. We see the same transformation in places like Manila, Bangkok, and Ho Chi Minh City.

What are the risks of buying real estate in Cambodia?

Recently, the apartment market in Phnom Penh has been quite volatile and in a bubble phase, mainly due to speculation and a high supply without also has the Covid 19 pandemic. Prices have fallen by up to 50% in the first half of 2020.

Acquiring units in new or off-plan real estate projects in prime locations is probably still your best option if you want to buy real estate in Cambodia. The process of acquiring existing apartments is too complex and you have to deal with local “partners”, which carries risks.

No matter if you have a considerable amount of money or a small budget to invest, why look for commercial houses costing between 50,000 and 100,000 USD in one of the least prosperous countries in Asia? The condominium market in Phnom Penh caters mainly to foreigners, such as Western expatriates and Chinese buyers.

We all aspire to a high standard of living when we stay in Asia.

Getting Property Loans in Cambodia

Foreign banks rarely grant loans to foreigners who want to invest in Cambodia, and it is virtually impossible to obtain one locally.

Instead, the vast majority of investors buy property with their own funds. If you need financing, it may be worthwhile to talk to property developers to see what options are available to you.

Property Prices in Cambodia

Cambodia is known for having one of the cheapest real estate markets in Asia.

Average prices are around 2,000-3,000 USD per square meter for apartments in prime areas, while new luxury condos can be sold for 5,000 USD per square meter. You will be able to buy a property at an average price of USD 1,000 to 2,000 in the outlying areas, which is in line with real estate prices in Indonesia for example.

However, it is best to opt for properties in prime areas for future capital growth.

According to IPS Cambodia, one of the largest real estate agencies in the country, prices in 2019 were as follows:

City Center

  • Residential land per sq.m.: USD 2,500
  • Commercial land per sq.m.: USD 5,000
  • Studio apartments: USD 120,000
  • 1-bedroom apartments: USD 150,000
  • 3-bedroom apartments: USD 350,000
  • 3-bedroom villas: USD 600,000

Outside the City

  • Residential land per sq.m.: USD 100
  • Commercial land per sq.m.: USD 300
  • Studio apartments: USD 40,000
  • 1-bedroom apartments: USD 60,000
  • 3-bedroom apartments: USD 120,000
  • 3-bedroom villas: USD 150,000

Cambodia Property Taxes

While buyers’ stamp duty is at an all-time high in places like Singapore and Hong Kong, reaching as high as 20 or 30 percent, property taxes are quite low in Cambodia.

If you buy units in off-plan real estate projects, you will often be exempt from paying certain taxes, such as capital gains tax.

Below is a summary of the taxes and fees payable to date:

VAT

When buying an apartment directly from a developer, a 10% VAT is applied. Sometimes developers include the VAT in the final sales price.

Transfer tax

The transfer tax is 4% and paid when you buy the property.

Property Tax

The Property tax is 0.1% and paid annually.

Amounts up to USD 25,000 are exempt from the tax, thus you can deduct this amount first. Also, the government multiplies the taxable amount by 80%, which lowers the tax burden.

Rental income tax

The rental income tax is 10% and paid annually.

Capital Gains Tax

A capital gains tax of 20% is paid by corporations and paid when selling property.

Individuals don’t need to pay any capital gains tax.

Renting Out real estate in Cambodia

You will not have too much trouble renting a property in Cambodia and a local real estate agent can help you find and manage the tenants.

In principle, this can be done by the same agent who helped you buy the property and he will manage all communication with the tenants.

The rental yields

International companies have high rent caps, and it is not uncommon for owners to rent up to $1,200 to $1,500 per month for two-bedroom units. Many developers offer programs with guaranteed rental income, which can be very attractive.

Cambodia is known for having some of the most attractive yields in the region, often reaching 7-8% in Phnom Penh.

That said, public statistics on rental yields are often lacking, and investors and advocates often share figures based on personal experience and/or word-of-mouth.

Best Cities to Buy Property

Since Cambodia is small in terms of area and population, it is mainly three cities that attract the most interest from property buyers.

Phnom Penh

It is quite logical that Phnom Penh is at the top of the list. Phnom Penh is the nerve center of the kingdom and hosts the largest number of expatriates.

Most of the multinationals open offices and factories there and the tourist industry is developing. It is worth noting that Phnom Penh relies heavily on Chinese investment.

As for the districts and neighborhoods, the following should interest you.

Daun Penh

Daun Penh is home to Phnom Penh’s financial district and major banking institutions. You will find mainly “local” properties here, but condominiums are also appearing, such as Chateaudo Condominium, Aura Condominium and Sky Apartment.

Due to its ideal location, we will inevitably see more condominiums being built in this district if the Cambodian economy continues to grow.

Beware of the risks of investing in established and old units. Chinese and local developers will do their best to grab the central and valuable land.

These companies will be ruthless in their expansion and the government will have little say when they decide to demolish the old buildings, which can happen almost overnight.

7 Makara

7 Makara is less expensive than Daun Penh and located towards the west of the capital and also further from the river.

That said, we are seeing more commercial activity with the appearance of cafes, bars and shops. 7 Makara should be of interest to you if you are looking for lower property prices and have a little more risk appetite.

Sihanoukville

Sihanoukville has a rather bad reputation for the past few years, mainly due to the large influx of tourists who come to party.

This is not really deserved and the city has amazingly beautiful white sandy beaches, but rapidly rising property prices.

Sihanoukville attracts mostly Chinese investors and tourists and some say that the city is the next Chinatown of Cambodia.

Siem Reap

Siem Reap attracts a considerable number of tourists every year because of the Angkor Wat temple and remains one of the must-see places in Asia.

As Siem Reap is one of the biggest tourist magnets in Cambodia, the creation of more jobs and opportunities will follow.

Buying a property in Siem Reap can yield interesting returns, as the town is set to grow even more in the future.

Kampot and Kep

Kampot, capital of the province of the same name, and the coastal town of Kep are located on the southern Cambodian coastline, east of Sihanoukville and close to the Vietnamese border.

The two cities are close to each other and share most of the same tourist sites and attractions, although some are closer to one or the other city.

This south Cambodia region is rapidly expending and offers a great opportunity to invest in real estate, certainly in Golf Harmony Villas & Apartments project.

Source: Asiapropertyhq | Publication on October 14, 2020 

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