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.
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
One point to mention first is that foreigners cannot legally own land with soft titles unless the property is held with a strata 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.
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.
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:
- 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:
When buying an apartment directly from a developer, a 10% VAT is applied. Sometimes developers include the VAT in the final sales price.
The transfer tax is 4% and paid when you buy the property.
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.
As the capital and largest city of Cambodia, Phnom Penh is a top choice for property investment. Here’s why:
1. Economic Hub: Phnom Penh serves as the economic, political, and cultural center of Cambodia. It attracts a large population of young professionals and expatriates, creating a strong demand for housing.
2. Infrastructure Development: The city has witnessed significant infrastructure improvements, including modern roads, public transportation systems, and amenities such as shopping malls, international schools, and healthcare facilities.
3. Property Appreciation: Phnom Penh’s real estate market has experienced steady growth, offering opportunities for property appreciation and rental yields.
As for the districts and neighborhoods, the following should interest you.
Chamkarmon District is one of the most sought-after areas in Phnom Penh, known for its central location and vibrant atmosphere. It comprises several popular neighborhoods:
- BKK1 (Boeung Keng Kang 1): BKK1 is a prestigious and upscale neighborhood known for its luxurious villas, high-end apartments, and trendy cafes and restaurants. The area offers a cosmopolitan lifestyle, with proximity to international schools, embassies, and shopping centers.
- Tonle Bassac: Tonle Bassac is an affluent neighborhood that has witnessed significant development in recent years. It features modern condominiums, upscale hotels, and a range of dining and entertainment options. The area is popular among expatriates and young professionals.
Daun Penh District is the historic heart of Phnom Penh and home to many significant landmarks and cultural sites. It offers a mix of residential and commercial properties. Two notable neighborhoods within Daun Penh District are:
- Riverside: Riverside, along the banks of the Tonle Sap River, is a popular area for tourists and expatriates. It offers a blend of traditional Khmer architecture, colonial-era buildings, and modern developments. Riverside is known for its vibrant nightlife, riverside promenade, and proximity to popular attractions.
- BKK2 (Boeung Keng Kang 2): BKK2 is a thriving residential neighborhood with a mix of residential and commercial properties. It features a range of apartments, townhouses, and businesses. BKK2 offers a more relaxed and residential atmosphere compared to the bustling BKK1.
Toul Kork District has gained popularity in recent years as a rapidly developing residential and commercial hub. It offers a suburban feel while still being relatively close to the city center. The district is known for its spacious villas, modern apartments, and a growing number of international schools. Toul Kork is particularly attractive to families and those seeking a quieter environment.
Located across the Tonle Sap River, Chroy Changvar District has experienced significant growth and development in recent years. This area offers a mix of residential, commercial, and entertainment options. Key attractions include the riverside promenade, new residential developments, and various entertainment venues. Chroy Changvar provides a serene and scenic living environment, away from the bustling city center.
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, a coastal city on the Gulf of Thailand, has emerged as a popular investment destination. Here’s what makes it appealing:
1. Beachfront Living: Sihanoukville offers beautiful sandy beaches, crystal-clear waters, and a relaxed beach lifestyle. Properties with beachfront or ocean views have high rental potential and can attract tourists and long-term residents.
2. Tourism and Casino Development: The city has seen significant investment in casinos and entertainment complexes, attracting tourists and boosting the local economy. This development has contributed to the demand for accommodation and commercial spaces.
3. Special Economic Zone: Sihanoukville hosts a Special Economic Zone (SEZ), attracting businesses, investors, and expatriate professionals. This creates a demand for housing and commercial properties.
Siem Reap, known for its ancient temples and tourism industry, is another promising city for property investment. Here’s why it stands out:
1. Tourism Potential: Siem Reap attracts millions of tourists each year, drawn to the iconic Angkor Wat and other historical sites. This creates a robust demand for accommodation, making it an excellent location for short-term rentals and hotel investments.
2. Growing Infrastructure: The city has seen continuous development in terms of infrastructure, including improved roads, airport expansions, and the presence of international hotels and resorts.
3. Cultural Charm: Siem Reap’s unique blend of traditional Khmer culture and international influences offers an attractive lifestyle for residents and tourists alike.
Battambang, located in northwest Cambodia, is gaining attention as an emerging city for property investment. Here’s why it’s worth considering:
1. Cultural Heritage: Battambang is known for its rich history, colonial architecture, and vibrant arts scene. It offers a unique cultural experience, attracting both local and international visitors.
2. Agricultural Hub: The city is an important agricultural center, surrounded by fertile lands and agricultural activities. This presents investment opportunities in agriculture-related ventures and potential demand for housing.
3. Urban Development: Battambang has witnessed urban development in recent years, with improved infrastructure, commercial centers, and amenities. This development contributes to the city’s growth potential.
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.
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.