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Cambodia will be a prime destination for property buyers in the coming decade. Having one of the fastest growing economies in the world, early investors with some risk appetite can gain great yields.
It’s also the last frontier country in Southeast Asia and that welcomes foreign investors with open arms. Not surprisingly, individuals and corporations pour in to take a slice of this growing market.
However, before you engage in Cambodia’s property market, it’s important that you learn about ownership regulations, what kind of property you should buy, where to buy, and more.
In this article, you’ll learn the following:
Can foreigners buy property in Cambodia?
Cambodia’s property ownership regulations are similar to those in Thailand and many other Southeast Asian countries. Here, foreigners can only get freehold ownership of strata-titled properties (mostly condos) and aren’t allowed to own land.
Similar regulations apply in the Philippines , Vietnam and Thailand, just to give you some examples. As read in Article 16, “Amended Law on Investment”, persons with a Cambodian citizenship or Cambodian entities have legal rights to own land.
It’s simple as that.
But there are ways for foreigners to buy and at least control land.
Buying land in Cambodia
You can buy land in four different ways in Cambodia. The process is not risk free, nor easy, if you’ve never engaged in the Cambodian property market.
Therefore, I highly recommend you to hire a reputable property lawyer and real estate agent earliest possible that can guide you through the buying process.
Let’s look at the four different options you have when buying land as a foreigner.
1. Buying land through a Cambodian company
This is probably the safest option to buy land in Cambodia. It’s a recommended option in many other countries, including Indonesia. Bear in mind though that the process to set up a company does require a bit of capital and time.
As foreigners can only own 49% of the company shares, be sure that you set up the company with person(s) you trust.
Despite being a minority shareholder of the company, you’ll be able to control the ownership of the property by using different contractual setups.
Be sure to do due diligence and appoint a property lawyer to help you through the process.
2. Setting up a leasehold agreement in Cambodia
Foreign investors are permitted to use land with a lease period between 15-50 years.
Sometimes, you’ll be able to extend the lease with a period of up to 50 years. Worth mentioning, if the state owns the land, the maximum lease period is 40 years.
keep in mind, one of the most important things to do before entering any leasehold agreement with a landowner is to check the title.
In case you don’t know what a title is, it’s a document confirming who owns the property and shows all the rights that you have as a property owner.
So, the title normally includes information about:
- Your rights to control the property
- Your rights to sell or rent out the property
- If there are any encumbrances or mortgages since previous ownership
Conducting a title search
It’s important that you do a title search in order to see who owns the title, and if there are any encumbrances registered in the property.
Before you sign the lease contract, it can also be good to do some research and a background check about the owner, to make sure that you lease from the right person.
A way to protect yourself could be, for example, to add a paragraph in your leasehold contract saying that you, as a lessee, must agree to any sale of the property.
On top of that, you can register a “block sale notice” at the Land office. By doing this, they can in turn block any sale of the land unless you have granted the sale.
3. Buying land by obtaining Cambodian citizenship
This option is one of the least attractive as it’s probably the most difficult and the most time consuming.
If you want to qualify for a Cambodian citizenship, you have two options:
- Reside in Cambodia for min. 7 years and show full proficiency in Khmer
- Make a big donation or investment
But it doesn’t stop here. The President need to approve any application for citizenship, which kind of speaks for itself.
4. Buying land with the help of a Cambodian nominee
Buying land with the help of a local nominee has been a common option among foreign buyers.
Simply put, buying through a Cambodian nominee means that you sign a trust-agreement with a Cambodian citizen, where he or she gives you the full rights to control the land.
Commonly, the landowner mortgage the land and lease it to you as an investor. A number of other documents should be drafted, often referred to as “Nominee security agreements”.
The documents will show the rights you have to control the land, and minimizing the risks that the nominee sell, transfer, or lease the land to another person.
Is it safe to buy property with the help of a Cambodian nominee?
It’s not, due to a number of reasons.
First of all, this method of buying land has been ruled out by the government. Thus, you’ll face a number of risks, such as getting the land confiscated. Or you might be forced to sell it.
Sure, the government might look between its fingers now, but you don’t know what will happen in 10 years.
Secondly, you face a risk that the nominee “runs” away or claim full ownership of the land. Bypassing laws through local contractual setups is not waterproof.
There’s no guarantee you’ll have much to say if you decide to go to a local court.
Obtaining Cambodian land titles
Before you invest in Cambodia, you need to study the different land titles thoroughly.
There are currently four types of titles available:
- Soft titles
- Hard titles
- Strata titles
One point I want to mention beforehand is that foreigners can’t legally own landed properties with soft titles, unless the property is held with a strata title.
What is a strata title?
As explained in my guide about buying property in Thailand, strata titles are used for condos, where the units are owned individually on a freehold basis. At the same time, unit owners share common areas like gyms, swimming pools, BBQ pits, children’s playgrounds, and more.
You’ll also need to pay a management fee on a monthly basis to cover the costs for the property management.
You can buy a unit in a condo that holds a soft title, in case it’s registered in a building with a strata title.
What are the differences between soft titles and hard titles?
Soft titles are recognized and recorded at a local level, while the hard title is recorded at a national level (which is better).
Still, soft titles have been widely preferred and most commonly used. At the moment, around 70% of real estate in the cities have soft titles, while it goes up to 80% in rural areas.
Benefits with soft titles
If you manage to buy a property with soft title, the transfer process will be quicker and easier. In addition, you can avoid the transfer tax of 4% that apply for property with hard titles.
Drawbacks with soft titles
There are a few drawbacks if you decide to buy a property with a soft title. First of all, you cannot obtain a mortgage and there will be less information about the property and its previous ownership.
Benefits with hard titles
Hard titles are becoming increasingly available for foreigners and have many benefits. For example, you’ll be better protected and have more information about the previous ownership.
What is LMAP?
LMAP stands for ‘Land Management and Administration Projects’ and is the safest and most transparent option when owning a property.
The World Bank started the LMAP project in 2002, with a main purpose to use an efficient system to register properties and to protect local property owners.
By using an efficient system to register the land, the country can overcome issues with involuntary eviction and land-grabbing, that occurred frequently in the past.
Process when buying property in Cambodia
Before you buy a property, it’s good to have a knowledge about the process and the different steps involved.
Let’s have a look at the different steps involved when buying a property on the secondary market.
1. Doing a title search
When you’ve found a property with the help of an agent, you should do a title search.
It’s highly important to assure that there are no encumbrances attached to the property and to check the previous ownership.
2. Contact the local Communce council
In addition to checking the title, contact the local Commune council and request more information about the property.
The first commune council was elected in 2002. Shortly explained, it consists of 5 – 11 persons and responsible to work with the development of infrastructure, health services, and to protect the environment, for example.
Be sure to get an ID copy from the person that acts on behalf of the company selling the property, in case you buy the property from a company (and not a private person).
The person should be certified to present the selling company at the Land office. Request documents that prove this.
The Ministry of commerce should have issued a certificate previously, be sure to receive a bona fide copy of that certificate.
3. Paying the deposit
When you have found a property that suits your needs, you’ll need to prepare a deposit equal to 10% of the property value.
At this stage, you’ve already managed most parts of the process. The next step is for you and the seller to visit the Cadastral Office and receive the documentation needed.
Before the Khan will be able to transfer your name to the title, the seller need to show the original title document, called a deed.
In general, the Castral Office will need up to a month to prepare the documents, signed and ready for submission.
4. Payment of the transfer tax
When you have received the documents from the Cadastral Office, you need to visit the General Department of Taxation, that will handle your payment of the transfer tax.
If you’ve made it this far, the seller will join you for a new visit to the Castral Office, to sign the buying agreement. Be sure to bring your receipt received when you paid the transfer tax, as this will be needed.
After around 5 working days, the Cadastral Office will send the final documents to the Municipal Land Office, that will in turn issue a certificate of title in your name.
You might need to wait up to 3 weeks before you can receive the final documents.
Buying condos in Cambodia
Some investors have managed to acquire and control land, might it be with the help of local companies or nominee structures.
However, as I explained, this can be risky and is not recommended for people who just want to allocate cash, getting better returns than from a bank account.
If this fits your profile, then the easiest and best is to buy condo units or commercial property that has a strata-title.
Condos come with a strata-title which means that you’ll get full freehold ownership of the unit. The building is co-owned where owners have separate units but share common areas, like swimming pools, sun decks, and more.
What are the benefits of buying condos?
There are many benefits of buying condos on the primary market. First of all, condos are maintained by dedicated property management companies.
You can sit on the other side of the globe while someone is managing tenants and repairs, hassle free.
Not to forget, condo units are easy to rent out, comes with 24/7 security, and have many nice amenities, as mentioned.
Cambodia, and primarily Phnom Penh, is a preferred location among many Chinese, Singaporean, Taiwanese, and Hong Kongers as:
- Rental yields are high
- You can use US dollars for property related transactions
- Condos cost a fraction compared to these countries
Future developments will be dedicated to condos
The Cambodian government is quickly replacing old shop houses with new condos and commercial buildings. I’ve seen a similar transformation in Shanghai a decade back.
Just quoting an article published by Bloomberg in the end of 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 condos?
Phnom Penh’s condo market has been very volatile and in a bubbly phase the past years, mainly due to speculation and a high supply.
Therefore, you should talk with your agent to confirm which areas that will perform well in the coming years.
Personally, I believe that buying units in new- or off-plan projects in prime locations is your best option. This will secure high (guaranteed) rental yields and make it easier to resell the unit.
One example is The Peak, a 55-storey luxury condo that will be integrated with a Shangri-La 5-stars hotel.
From here, you’ll be able to reach NagaWorld Casino (the only luxury casino in Cambodia), the upcoming tallest twin tower in the world (TBR Twin Tower Trade Center), a number of embassies, and Dreamland.
Keep in mind that Phnom Penh’s condo market is mainly to cater foreigners, such as expats and Chinese visitors.
Getting property loans in Cambodia
Overseas banks rarely grant loans to foreigners who want to invest in Cambodia and it’s practically impossible to get one locally.
Instead, a great majority buy property with cash assets.
In case you’re in the need of financing, it can be worthwhile talking with developers and see what options you have.
Property prices in Cambodia
Cambodia is famously known for having some of the cheapest real estate in Asia.
Prices average of around USD 2,000-3,000 per square meter for condos in prime areas, while new luxury condo units can easily be sold for up to USD 5,000 per square meter.
You’ll be able to buy property with an average price of USD 1,000-1,500 in fringe areas, which is on par with property prices in Indonesia. Still, you’d better look at property in prime areas for future capital growth.
Property taxes in Cambodia
At the same time as buyer’s stamp duties record all time highs in places like Singapore and Hong Kong, reaching up to 20-30%, property taxes are fairly low in Cambodia.
If you buy units in off-plan condo projects, you’ll often be exempt from paying some of the taxes, like capital gains tax.
Below I’ve summarized the taxes and fees that need to be paid, as of the moment I’m writing this article:
If you buy condos directly from a developer, a VAT of 10% applies. 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.
Rental income tax
The rental income tax is 14% 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 property in Cambodia
You have no particular issues to rent out property in Cambodia and a local agent can help you to find and manage tenants.
Normally, this can be done by the agent that helped you to buy the property and they’ll manage all the communication with the tenants.
Rental yields in Cambodia
International corporations have a high cap on rents and it’s not uncommon that property owners can earn as much as USD 1,200 – 1,500 a month for 2 bedroom units.
Not to forget, many developers offer lucrative guaranteed rental income schemes, that can be very attractive, of course.
Cambodia is famously known for having some of the highest yields in the region, often stretching up to 7-8% in Phnom Penh.
Best places to buy property in Cambodia
Being a small country in terms of land area and population, there are mainly three cities that draw the biggest interest among property buyers.
Let’s have a look.
Buying property in Phnom Penh
Not surprisingly, Phnom Penh should be at the top of our list.
Phnom Penh is the business hub and caters the highest number of expats and foreigners.
Most multinational corporations open offices and manufacturing operations here at the same time as the tourism industry expands.
Buying property in Sihanoukville
Sihanoukville has received a somewhat bad reputation the past years, mainly due to its big influx of foreigners who want to party.
It’s not well deserved and this place has amazingly beautiful white beaches, with land and property prices that increase quickly.
Sihanoukville attracts mostly Chinese investors and travelers and some people even say it will become Cambodia’s new China town.
Buying property in Siem Reap
Siem reap receives a huge amount of tourists every year and continuous to become one of the to-go places in Asia.
As Siem reap is one of the bigger tourist magnets in Cambodia, the creation of more jobs and opportunities will follow.
To purchase a property in one of the most cultural areas in Cambodia can result in high yields as the city is predicted to grow even more over the years.
Cambodia is growing fast economically and the first option for overseas buyers comings from Singapore, Mainland China, Hong Kong, and Taiwan.
Condos can be bought with the help of a local agent or developer. They usually have good connections with lawyers that can draft the contracts and manage most parts of the purchasing process for you.
Buying houses or land should be done with more scrutiny, finding a reputable agent and property lawyer should be done from day one.
Property prices are still very low and stretch between USD 2,000 – 3,000 for prime property in central areas. Prices can reach up to USD 5,000 in case you go for a luxury unit.
I hope you found this article interesting and wish you good luck with your property purchase in Cambodia. If you want to buy off-plan property, I also recommend you to read my separate article that lists the the biggest property developers in Cambodia.