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Cambodia is one of the fastest-growing economies in Asia and novice investors with some risk appetite have made great gains here in the past decade.
It’s also the last frontier country in Southeast Asia where it’s comparatively easy to start a business.
With that said, being a developing country, things are done differently compared to what many foreigners are used to.
Before you engage in Cambodia’s property market, it’s important that you learn about ownership regulations, property options available, where you should buy property, and more.
In this article, we review the following topics:
- Can foreigners buy property in Cambodia?
- How to Buy Land in Cambodia
- Obtaining Cambodian Land Titles
- The Process When Buying Property in Cambodia
- Buying Condos in Cambodia
- What are the risks of buying property in Cambodia?
- Property Prices in Cambodia
- Property Taxes in Cambodia
- Best Cities to Buy Property in Cambodia
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 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 recommended in many other countries, including Indonesia. Bear in mind that the process to set up a company does require a bit of capital and time.
As foreigners can only own 49% of company shares, assure that you set up the company with partners you trust.
Despite being a minority shareholder of the company, you will be able to control the ownership of the property by using different contractual setups.
It’s crucial to do due diligence and appoint a property lawyer to help you through the process.
2. Setting up a Leasehold Agreement
Foreign investors can lease land for a period of 15 to 50 years.
Sometimes, you’ll be able to extend the lease up to 50 years. If the state owns the land, the maximum lease period is 40 years.
Keep in mind, one of the most important tasks to manage before entering a leasehold agreement with a landowner is to check the title.
The title 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
You must do a title search to see who owns the title and if there are any encumbrances registered in the property.
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 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 needs 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 right to control the land.
Commonly, the landowner mortgage the land and lease it to you as an investor. Many 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 sells, transfer, or lease the land to another person.
Is it safe to buy a property with the help of a Cambodian nominee?
It’s not, due to several reasons.
First of all, this method has been ruled out by the government. It can result in a scenario where the government confiscates your land 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 later on.
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 also need to pay a management fee monthly to cover the costs for 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 a soft title, the transfer process will be quicker and easier. In addition, you can avoid the transfer tax of 4% that applies 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 the 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.
The Process when Buying Property in Cambodia
Before you buy a property, it’s important to have 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.
As mentioned, it’s important to assure that there are no encumbrances attached to the property and to check the previous ownership.
2. Contact the Local Commune 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 needs 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, which will handle your payment of the transfer tax.
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, which 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 through local companies or nominee structures.
The easiest and most preferable option among foreigners is to buy condo units or commercial property that has a strata-title.
Freehold condos come with a strata-title which means that you’ll get full 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?
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 come with 24/7 security and have many nice amenities that are sought after among many foreigners.
Worth mentioning is that:
- Rental yields can be high
- You can use US dollars for property-related transactions
- Condos cost a fraction compared to Western countries
- You own the unit on a freehold basis without risky local contractual setups
Foreigners sometimes talk about the benefits of buying shophouses in Cambodia. Even if these might come with yields that are a couple of percent higher than condos, foreign buyers predominantly target condos.
These kinds of advocates also tend to actually reside in condos in more developed countries and cities. They simply don’t live up to what they proclaim.
Future Developments Will Be Dedicated to Condos
The Cambodian government is quickly replacing old shophouses with new condos and commercial buildings. I’ve seen a similar transformation in Shanghai a decade back.
Just quoting an article published by Bloomberg at 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 property in Cambodia?
Phnom Penh’s condo market has been volatile and in a bubbly phase, mainly due to speculation and high supply. Prices dropped by up to 50% during the first half of 2020.
Now, I think we can both agree that’s a considerably risky market.
Personally, I believe that acquiring units in new- or off-plan projects in prime locations is still your best option if you truly want to buy real estate in Cambodia.
The process to acquire local flats is too complex and you have to deal with local ‘partners’, which brings risks in itself.
No matter if you possess a sizable amount of money or are careful with your savings, why would you look for shophouses costing USD 50,000 – USD 100,000 in one of the least prosperous countries in Asia?
Phnom Penh’s condo market is mainly to cater to foreigners, such as expats and Chinese travelers. Bringing your family to a narrow alley with sanitary issues is probably not your cup of tea.
After all, we all strive for a higher living standard when staying in Asia.
The Deal with Leasehold vs Freehold
Most Southeast Asian countries, including Thailand, Cambodia, the Philippines, and Malaysia offer freehold ownership of property to foreigners.
In short, this means that you own the property “outright”. Other countries such as Vietnam and Indonesia don’t allow foreigners to own property on a freehold basis.
Instead, we have to buy the units on a leasehold basis, which is 50 years in Vietnam with a chance for renewal. This also puts some constraints when selling the property in case little time is left of that leasehold period.
With that said, no one really knows what will happen in the coming decades, or possibly years. The country is known for being politically unstable and has experienced issues with land-grabbing in the past.
Being one of the least developed countries in Asia and with strong ties to China, no one knows how foreign ownership will be affected in “50 years”.
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 known for having some of the cheapest real estate in Asia.
Prices average of around USD 2,000 to USD 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 a property with an average price of USD 1,000 – USD 1,500 in fringe areas, which is on par with property prices in Indonesia.
However, you’d better look at property in prime areas for future capital growth.
Cambodia Property Taxes
At the same time as buyer’s stamp duties record all-time highs in places like Singapore and Hong Kong, reaching up to 20% to 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 a 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 Cities 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.
Not surprisingly, Phnom Penh should be at the top of our list. Phnom Penh is the business hub and caters to the highest number of expats.
Most multinational corporations open offices and manufacturing operations here at the same time as the tourism industry expands.
Looking at districts and neighborhoods, the following should be of interest.
Daun Penh is the home of the financial area and many banks in Phnom Penh.
Here, you’ll mainly find ‘local’ properties but we also see condominiums popping up. Examples include Chateaudo Condominium, Aura Condominium, and Sky Apartment.
With its strategic location, we will inevitably see more condominiums being built here if the Cambodian economy will continue to expand.
Beware of the risks of investing in established and old units. Chinese and local developers alike will do their utmost to get hold of the central and precious land plots.
These companies will be ruthless in their expansion and the government will have little to say once they decide to demolish these old properties, which can happen almost overnight.
7 Makara is less pricey than Daun Penh and located towards the West of the area. You will be further away from the river as well.
With that said, we see more commercial activity with cafe’s, bars, and stores popping up. 7 Makara should be of interest if you seek lower property prices and have a bit more risk appetite.
Sihanoukville has received a somewhat bad reputation in 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 Chinatown.
Siem reap receives a huge amount of tourists every year and continues 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.
Below I have includes some commonly asked questions and our replies.
Is it safe to buy property in Cambodia?
In short, yes. Buying a condo unit from a reputable developer requires less work and is generally safer compared to buying a property through a holding company or a local nominee. With that said, Cambodia has favorable ownership regulations and foreigners can get hold off freehold property, having total control of their properties.
It’s important to do thorough due diligence whatsoever, to avoid future disputes and that the property has mortgages or other liens tied to it.
How much does it cost to buy a house in Cambodia?
3-Bedroom villas in the city center costs around USD 600,000 on average. The price drops to around USD 150,000 for units outside of the city center. Prices rise fast in Cambodia but be prepared to pay USD 20,000 to USD 80,000 per square meter.
Can Australians buy property in Cambodia?
Australians are treated in the same way as other foreigners and have no issues buying strata-titled (condominium) units without the need of setting up holding companies or to partner with local nominees.