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Cambodia’s Real Estate Loan Size Growing Rapidly, Cambodian Government to Formulate the Residential Property Price Index, Indicating an Increasingly Standardized Cambodian Real Estate Market

Release time:2020-05-11 Reading volume:436 Source:Ministry of Finance of Cambodia By: Lu Jiming

In 2019, the Cambodian construction industry attracted an investment of USD 9.35 billion, marking a growth of 79% from the previous year. (Photo: Cambodia-China Times)

(Phnom Penh) The National Bank of Cambodia will complete the “Residential Property Price Index” in the near future as a risk indicator to evaluate the impact of real estate loans on the overall economic stability of the country.


According to the latest bank regulation report released by the National Bank of Cambodia, there is a continuous rapid growth in the real estate loans issued by the banking system of Cambodia. While the annual growth of real estate loans granted by banks is as high as 37.9%, that of real estate loans granted by small loan institutions reaches 13.9%.

It has pushed the loan portfolio ratio of Cambodian’s bank loans to the real estate industry to 24.8%, and 97% of the loans are granted by banks.


Bewaring of the Overheated Real Estate Market


The rapid rise of real estate loans has also driven Cambodia’s customer loans in the banking system to rise by 25.6% on a year-on-year basis, reaching USD 25.1 billion. It has further forced the National of Bank of Cambodia, as a financial regulator, to keep a close eye on the country’s credit expansion, especially on the risk brought by the “overheated” real estate market on the country’s macro economy and stability of banking system.


However, the Credit-to-GDP Gap last year dropped to 8%, marking its first time lower than 10%.


According to the National of Bank of Cambodia, among the real estate loans granted last year, 41.7% were loans to house purchasers, 43.3% were real estate activity related loans and the remaining 27.6% were construction loans.


Foreigners made a total investment of USD 1.782 billion on the Cambodian real estate industry last year, up by 2% from USD 1.474 billion in 2018. Among the foreign investors, China invested USD 1.048 billion, taking up about 60% of the total investment. Other state investors included Japan (USD 62 million), Singapore (USD 271 million), the United States (USD 214 million) and South Korea (USD 109 million).


With the technical support by the International Monetary Fund (IMF), the National Bank of Cambodia disclosed that it’s now formulating the Residential Property Price Index to enhance the evaluation on the industry’s conditions and risks and improve the credibility of data collected.


Important Reference Data


“The Residential Property Price Index will become important reference data reflecting the market development conditions and trends of the industry, and help the National Bank of Cambodia manage industry related risks ore efficiently.”


Recent years have seen the rapid credit growth of Cambodia’s banking system, causing the concern of IMF which has issued warnings to the Cambodian authority repeatedly. According to the calculation method of Credit-to-GDP Gap adopted by the Bank for International Settlements, if the Credit-to-GDP Gap of a country continuously exceeds 10%, its credit level will be considered excessively high.


After the Credit-to-GDP Gap of Cambodia rose to 20% in 2015, the National Bank of Cambodia adopted a series of credit squeeze measures. The credit growth of Cambodia dropped to 17.2% in 2017, but rose to 24.3% in 2018.


With the rapid growth GDP, however, the Credit-to-GDP Gap of Cambodia has continuously narrowed, dropping from 31.2% in 2016 to 19.3% in 2017, 16.5% in 2018 and 8% last year when it first declined to a level lower than the 10% warning line.


It’s worth mentioning that the Cambodian construction industry has replaced the ready-made clothing and shoe-making industry as the locomotive driving Cambodia’s rapid economic growth. In 2019, the Cambodian construction industry attracted an investment of USD 9.35 billion, marking a growth of 79% from the previous year.


Among the construction projects, over 80% were residential construction projects, 9.2% commercial construction projects and 3.5% tourism construction projects.

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