Ngeth Both guards one of the many newly built high-rise condominiums in Koh Pich, a luxury district in the Cambodian capital Phnom Penh. Both's job is quiet most days. There is almost no traffic in the street, and there is hardly anyone living inside the condo.
"It's always quiet. Each day only two or three people exit the building," the security guard said.
Phnom Penh's skyline has changed dramatically in the past decade. All over the city, old buildings are rapidly being replaced by new ones.
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One of Koh Pich's condos is on the market for $1,500 (€1,322) per square meter. The total price of the eight-story building is around $1.8 million. Dubbed The Elysee, the street was inspired by French architecture to try and draw in new residents. The neighborhood has even erected a replica of the Arc de Triomphe, in the hopes residents feel they have been transported to Paris.
But many of the glistening new condos are sitting empty. Most of them are so expensive that the average Cambodian family could never afford them.
Sreynik Seng, who runs a small coffee shop in the area, told DW that most of the property there is owned by Chinese citizens. "Some of them try to rent out rooms. Others only seem to have it purely for the sake of owning it. I don't think it matters to them when their building is empty," Seng said.
Increasing reliance on foreign investment
Foreign direct investment (FDI) is considered very important for Cambodia's developing economy. Last year, the country received around $3.5 billion in FDI. 43% of the investment came from China — making China by far Cambodia's largest foreign investor.
Kim Heang, the CEO of Khmer Real Estate, told DW that once construction is completed, many of the Phnom Penh condos are purchased by people from China, Taiwan and Singapore. Many of them don't live in Cambodia permanently.
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"Between 2013 and 2017, most buyers were foreigners. But they don't come to stay here," Heang said, adding that it leaves many condos seemingly deserted.
In addition, the coronavirus pandemic has prompted many foreigners to return to their home countries, further increasing the vacancy in Cambodia's housing market. The country's real estate industry, nevertheless, remains highly lucrative, Heang stressed.
"2013 to 2016 was a golden time for condos. Some people made a lot of money with profits going up to 300%. Five years ago, the profit went down to about 200%. Now it's 30-40%," he said.
However, supply has grown much faster than demand. In 2016, there were less than 5,000 luxury flats in Phnom Penh. By late 2019, there were over 18,000, according to the CBRE Group, an American commercial real estate investment firm.
In a 2019 report, CBRE warned of the risk of saturation in the condominium market. "Whilst supply is accelerating rapidly, the affordability of these segments has not adjusted to fit the local context and hence caused increased dependency on international investors," the report said.
Money laundering and safety concerns
Financial crime watchdogs have also raised concerns about how exactly the million-dollar condos are being financed.
Fearing that money was being laundered on a large scale, the anti-money laundering organization Financial Action Task Force (FATF) urged the Cambodian government to implement risk-based supervision for real estate and casinos. The European Union also listed Cambodia as a high-risk country for money laundering and financing terrorism.
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To address international concern, Cambodia's National Assembly approved a new law in which money laundering can be punishable for up to five years in prison. Prime Minister Hun Sen said that the new law was a response to FATF's call for action, local newspaper Khmer Times reported.
But it's not only money laundering that has sparked concerns. Non-governmental organizations and labor unions also worry about the quality control of some of Cambodia's newest buildings. Last year, an unauthorized seven-story building under construction collapsed in the coastal town of Sihanoukville, killing 28 people.
San Chey, the director for Cambodia of the Affiliated Network for Social Accountability, told DW that widespread corruption creates a gateway for illegal and unsafe construction.
"It's not just about money, it's about ignoring the legality of a project. There's a failure of monitoring and a failure to take legal actions. It can lead to people getting killed."
Pouring another cup of coffee at The Elysee, Seng, however, still feels optimistic about the future. "There's more and more offices opening here. Perhaps next year there will be more residents here as well," the café owner said.