A helping hand needed

Photo by: SOVANN PHILONG
Prime Minister Hun Sen opens the 2009 Cambodia Outlook conference. Realtors say the future of Cambodia’s property market is in his hands.

The Phnom Penh Post

Written by SOEUN SAY AND MAY KUNMAKARA
Wednesday, 18 March 2009

A senior official says government is doing all it can after local agents urge Prime Minister Hun Sen to step in and help the troubled industry

A spokesman for local real estate agents is asking for a meeting with Prime Minister Hun Sen to make a case for government intervention in the property market in the hope of reversing a decline in sales and investment.

But the undersecretary of state for the Finance Ministry says such a meeting is unlikely.

Sung Bonna, the president of the National Valuers Association of Cambodia, made the public call for a half-day meeting between the prime minister and key industry figures at a meeting of business people Friday night at the Almond Hotel. He warned the country faced bankruptcies and mass layoffs if the government did not take steps to ease investor and buyer concerns.

"We hope the construction and real estate sector will receive a boost if the Cambodian government joins us to discuss possible solutions to the slump in the sector," Sung Bonna said. "If not, the slowdown will only worsen."

Between 100,000 and 150,000 people were at risk of losing their jobs if the slump continued, Sung Bonna said. Job losses would not only hit realtors and construction workers but spread throughout the sector's value chain, hitting architects, furniture suppliers, lawyers and people in the building materials sector.

The request for a meeting came a day after Sung Bonna called for more government involvement in the sector at last week's 2009 Cambodia Outlook Conference.

Sung Bonna told the conference that strengthening laws on land titles and property was the key to boosting confidence in the sector.

"People are scared of Cambodia because we have no laws," he said.

"This is a period where we need to compete with neighbouring countries. Any law that will make more headaches for investors we should temporarily withdraw and reconsider."

He was referring to the controversial housing development prakas temporarily shelved last year following an outcry from developers.

Korean developers in particular said they would be unable to progress with development plans should the rules take effect.

However the government has repeatedly pledged it will be pushed through in some form.

Meeting unlikely

Ngy Tayi, undersecretary of state for the Ministry of Finance and chairman of the Inter-Ministerial Task Force, told Prime Location on Monday he would pass on the request for a meeting to the prime minister's office but that a meeting with Hun Sen was unlikely.

"This is the time for [lower-level] government officials and experts in the real estate and related fields to discuss the property sector downturn," he said. "It is not the time to discuss with the Cambodian prime minister."

At his opening speech at the Cambodia Outlook Conference, Hun Sen acknowledged the extent of the economic problems facing Cambodia as a result of the global economic crisis and called on the private sector to diversify and expand into sectors other than tourism, garments and agriculture.

However, he was criticised for not setting out any concrete steps to boost the real estate sector.
"The government has concentrated on tourism, agriculture and the extractive industries but we have received no encouragement," Sung Bonna said.

Chhean Dara, project manager of the $50 million Happiness City complex on Phnom Penh's Chroy Changvar peninsula, also called for government intervention. He said the company was offering 20 percent discounts on houses and villas to no avail and warned it would be forced to stop construction within three months if no new buyers materialised.

"I think that if the government cannot find any solutions to help turn around the real estate sector downturn, it will slow Cambodia's economic growth," he said.

The request for a meeting comes after sales activity in the Cambodian property sector dropped to almost zero after hitting a peak around the middle of last year, buoyed by an influx of foreign investment.

Asking prices had dropped between 30 and 40 percent from the June peak as speculators tried to offload holdings in a market with no buyers, Sung Bonna said.

He said a failure to act would not only increase social instability through rising unemployment but that the dual decline in sales and property values would erode government revenues from stamp duties on land transfers and VAT taxes on the sale of apartments, villas and houses.

The government charges 10 percent VAT on the sale of properties and four percent transfer tax on the sale of land.

Land Management Minister Im Chhun Lim told the Post last month that the government collected $21.35 million in property transfer taxes in 2007, up from $1.47 million in 2003 due to better revenue collection and improved relations with the larger estate agents.

In a departure from his prepared presentation, Ngy Tayi answered Sung Bonna point-by-point at the conference. While acknowledging Cambodia's legislative framework needed to be strengthened, he reminded the audience that the sector had been hit hard by the global financial crisis, with foreign investors scaling back major developments. Real estate prices had also been badly inflated in recent years and that the market needed a correction, he said.

The government had also worked closely with the sector, he said, in large part through the Inter-Ministerial Task Force it established last year to liaise on policy development.

It had also played a key role in setting up the National Valuers Association, of which Sung Bonna is president, implemented rules governing certification of estate agents and was working through industry concerns over the prakas on housing development accounts in consultation with stakeholders.

The government was also continuing to develop its legal framework, he added, as well as creating standards on valuations and real estate transactions fees, drafting a code of conduct for real estate developers, setting up an institute for professional real estate trading, and establishing a housing development association.

It was also working towards integrating the National Valuers Association of Cambodia into the ASEAN Valuers Association, Ngy Tayi said.