Cambodia - Property
Property is cheap both to buy and rent in Cambodia. Renting is simple and safe, but buying brings with it many dangers. Buying though opens up the opportunity of a financial gain if property prices rise. This makes buying very attractive to many foreigners. Especially because real estate is so cheap.
But beware. Foreigners can only own property in Cambodian buildings that is above the ground floor. This works well for apartments or even older buildings with several levels, like the top floor of a shophouse. But it means purchasing land or houses or bottom floor apartments is currently not allowed.
Real estate agents will tell you that this can be done (see “More” below for ways you are told you can do this) and perhaps this is so. We advise however to stay within the meaning and letter of the law. Circumventing laws is always fraught with danger. Alan, the editor of the Phnom Penh Post, would buy a property in Phnom Penh if he had the money: ‘Owning a property in Cambodia, though, would be a long-term investment. Tourism is going to explode and the political situation will steadily settle down.
‘What I see in Cambodia now is what I saw in Thailand 35 years ago. The place is just starting to open up and take off. If people want to visit the real Southeast Asia, it is here in the countryside of Cambodia. People are living like they did 2000 years ago. Not much has changed; they’re still using buffalos in farming, for example. You don’t see that in Thailand anymore, but you see it here.’
Still, property prices remain most affordable for many foreigners: a pleasant two-bedroom, two-bathroom apartment in central Phnom Penh costs between A$50,000 and A$300,000. Outside of the city, it is significantly cheaper. Alan told us: ‘I have an American friend—a professional tennis coach—he bought a block of land and built a house on a hillside in Kep with ocean views. The land, the house, everything, cost him US$25,000.
‘It’s not a flash big house, but basic Khmer style with two bedrooms on stilts. It has power and water tanks. It is about ten minutes drive to the beach. Quite a few people also live on the beach down that way.’ Kep was Cambodia’s top seaside destination until it was eclipsed in the 1960s by Sihanoukville. But today it is enjoying a renaissance, especially amongst Cambodians. This is partly because Sihanoukville is full of girlie bars and attracts sexpats.
Foreigners can own freehold property in Cambodian buildings above the ground floor. This works well for apartments, or even older buildings with several levels, like the top floor of a shophouse. The intention of the law is that foreigners cannot own land or houses, only apartments.. But we are in Asia, and the intention of the law is often circumvented.
Be clear, we never recommend circumventing the law. It can cause extreme difficulties over time. We are of the view that you keep it simple. If you want to buy something, buy an apartment above the ground floor—and seek expert legal advice about the purchase. (See Appendix for more details on property.)
This one bedroom serviced apartment is located in the southern district of Toul Tom Poung, near the Russian Market and the restaurants of that area. This is central Phnom Penh. The property is fully furnished and equipped to a western style. Part of a larger complex. There is a rooftop pool and gym available for tenant use.
US$450/month - two bedrooms, one with en-suite, and an open plan kitchen/living area. The property comes furnished with a large LCD TV, refrigerator, gas cook top, lounge and dining settings.
This 2 bedroom, 2 bathroom apartment with large balcony and good views over Phnom Penh is renting for US$450/month.
Despite the increased inflow of Westerners, rent in Cambodia is still very cheap compared to Australia.
The NGO area of BKK1, where Garry and Rita live (Link to Real Stories/Phnom Penh), is upmarket—with tree-lined streets, larger homes, serviced apartments, a myriad of restaurants and bars. Rent ranges from about A$2000 to A$3000 a month for a pleasant house with gardens.
Alan pays A$600 a month for an apartment. At his previous place, the top half of an old house in the centre of town, which Alan described as beautiful, he paid A$450 a month. But, he pointed out, even that was expensive. ‘A lot of the staff at the Phnom Penh Post would be paying A$200 to A$250 a month for a furnished and air-conditioned apartment,’ said Alan.
Foreigners can own property in Cambodian buildings above the ground floor. This works well for apartments or even older buildings with several levels, like the top floor of a shophouse. The intention of the law is that foreigners cannot own land or houses, just above ground-floor apartments.
A number of real estate agents and lawyers talk about mechanisms that allow foreigners to fully control the purchase, sale and use of real property. They claim that there are five options for buying real property (other than above ground-floor apartments), which are as follows:
1. Forming a company with a Cambodian citizen
Form a limited company in partnership with a Cambodian citizen. Any real property purchased for investment is then registered in the name of the company. The company must have a minimum 51 per cent Cambodian shareholding. However, careful allocation of shares, and careful drafting of the rights attached to share certificates, can ensure the foreigner’s full control of the company and its assets. Additional mortgage, security and power of attorney documents can also be created to accompany ownership documentation.
Under this option, the foreigner is expected to pay 100 per cent of the purchase cost of real property plus any construction costs. If the real property is later sold, 100 per cent of the sale price goes directly to the foreigner. This includes any profit accrued as a result of the property increasing in value. This issue should be detailed carefully in any company and/or sales documentation.
2. Purchase plus long-term rental
This method allows foreign nationals to purchase real property and register the title deed in the name of a Cambodian citizen. The foreigner and the Cambodian then enter into a long-term rental agreement by which the Cambodian citizen leases the property back to the foreigner. Lease periods can last up to 99 years.
The problem many foreigners have with this option is the concept of renting back property that has already been purchased.
However, correct drafting of the terms of the property holding and lease arrangements make this a reasonably secure method of controlling real property in Cambodia. Under this method, the foreigner may sell the property at any time and keep 100 per cent of the revenue from the sale. The Cambodian citizen is not permitted to disagree with or obstruct the sale. The foreigner retains the original copy of the new title deed as a security precaution: sale of real property is impossible without the original copy of the title deed.
Though the foreigner can sell the property at any time, the Cambodian citizen’s signature or thumbprint is generally required before any sale can take place. A good working relationship between both parties is therefore very important.
3. Registering real property with a Cambodian citizen
This method is very similar to option two, but requires 100 per cent trust in the Cambodian citizen.
Foreign nationals have rights, under the kingdom’s statutes, to choose a Cambodian in whose name their title deed is registered. That is, a foreign national can purchase property and register the purchased property in the name of the Cambodian citizen.
Once the title deed is transferred to the Cambodian citizen, the foreigner retains possession of the new title deed. This is a security precaution that protects the foreigner’s interests by preventing the Cambodian citizen from selling the land or property: sales are impossible without the title deed. Transferring the Cambodian’s rights to the foreigner via a mortgage or lease agreement provides additional security for the foreigner’s investment.
Copies of the title deed and any mortgage or lease agreements must be registered with the Department of Provincial Land Management, Urban Planning and Construction, as well as the appropriate district and central government departments that handle land registry. Most importantly, a copy of the land title and any mortgage or lease agreements must be lodged with the Cadastral Land Registry Office.
The Cambodian citizen in whose name the title is registered does not need to be resident in Cambodia. For example, the title can be registered with a Cambodian citizen living in the USA or Australia. The Cambodian citizen must be able to prove Cambodian nationality.
4. Marriage to a Cambodian National
Foreign buyers who are married to a Cambodian national can register real property using the name of their wife or husband on the title deed. It is also possible for a foreign national married to a Cambodian citizen and resident in the country for a long period to apply for Cambodian citizenship. In the event of citizenship being granted, Cambodian law holds that land can be registered in the names of both parties. Neither partner can subsequently sell the land or property without mutual agreement.
In the event of divorce or separation, division of the land or property is dependent on the conditions under which divorce or separation takes place, and the decision of any court ruling or arbitration relating to the divorce. It is often a source of conflict between the divorcees.
5. Acquisition of Honorary Cambodian Citizenship
A foreigner may be granted honorary Cambodian citizenship if he or she donates a significant sum of money to the Royal Government of Cambodia for the purposes of benefiting the people of Cambodia. Foreigners who have made a special impact or rendered exceptional help to the kingdom may also be granted this honour in recognition of their expertise or altruism.
One consequence of being granted honorary citizenship is that it becomes possible for a foreign national to acquire a 100 per cent right of ownership over real property purchased within the kingdom. This arrangement is recognised by the Ministry of Land Management, Urban Planning and Construction for the Kingdom of Cambodia, and by the Royal Government.
Honorary citizenship is recognised by the Royal Government of Cambodia as a legitimate means of purchasing real property within the kingdom but it does not affect the foreigner’s original nationality or citizenship in any way.