No country has achieved high levels of economic growth without urbanization. For more than two decades, Cambodia has been on a promising path to strong economic performance with an average growth of 7% annually. The Kingdom’s economic status was transformed to a lower-middle-income country with Gross Domestic Product (GDP) per capital approximately 1,270 USD in 2016. By 2030, Cambodian population in urban area will increase from 27% to 44% (or approx. 8 million) of the total population.

An aerial view of development projects on Koh Pich (Photo www.todayonline.com)

Cambodia’s real estate market is the frontier of foreign investment with a range of opportunity. Cambodia’s average of urban expansion is one of the highest in East Asia. The Ministry of Land Management, Urban Planning and Construction announced more than 20% increasing of approval construction project, valued about USD 6 billion, in 2017. From 2015 to 2030, Cambodia will need more than 800,000 homes to fulfill its demographic and socio-economic changes.

Phnom Penh, the capital, has witnessed significant urban growth at a rapid rate. The capital is classifies as one of Asia’s most remarkable building booms. Moreover, skyscrapers are under construction all over the city.  The capital’s size expanded to 678.46 square kilometers with close to 2 million residents today.

Skyscraper towers in Phnom Penh (Photo Construction and Property Magazine)

In contrary, the steady growth of construction project is unlikely helping Cambodian home-buyers.  The increase in new residence’s supply should push down or lowering of prices gradually. However, it is not a case in Phnom Penh. Majority of customer are foreigners and foreign investors. Cambodian’s ability to afford a house is actually decreasing as the price of house and condominium is skyrocketed.

Cambodia government needs to immediately invest in housing project. Possibly, it can join forces with private investment companies to build affordable housing for middle-income citizens and social housing funding for the country’s poorest residents. Currently, all construction projects are privately owned and insufficient state-funded social housing program. For Cambodian citizens, in order to own a house, they need to spend a lot of years working. Low and middle-income people do not have financial capacity to cope with the current rising value of land.

Urban poor community in Phnom Penh (Photo from Larousee)

Some observers have raised some concerns about the actual implementation of national policy on social housing project. Cambodia regulated a National Housing Policy to support low-and middle-income families and civil servant via social housing, which partly subsidized by the government in 2014. The policy will target civil servant and people who have salary range from $200 to $400 per month. However, It is difficult to define low-and middle-income and how we can determine those who are needed.

There are two persistent challenges that Cambodia government and relevant stakeholder will need to be overcome: cost of funding and land, with social housing project.

It is very doubtful whether Cambodia government has enough funding to develop subsidized housing projects. In this circumstance, government should regulate a new framework that enables its public institution to work with developers, investors and banks to generate investment funding, otherwise the implementation remains unclear. In addition, Cambodian tends to live in urban area and on the ground floor building, not penthouse with several floors. Finding an alternative for this tendency is the challenge because land in urban area is so expensive for low-and middle-income housing. As the government has great authority to control over land, so the public sector has enormous influence on land management and allocation.

For long-term creative solution, the government should encourage private companies to invest on low-and middle-income housing model by providing incentive on taxes, and physical infrastructure development; i.e. electricity, road, water supply…etc. Urban planners and governments need to find sustainable solution to support low-and middle-income residents to be accessible to social housing. As part of this constant mechanism to support the low-and middle-income households in Cambodia, it will not exacerbate inequality and hinder social mobility.