PHNOM PENH: A new report by the World Bank this month paints a picture of a sluggish Cambodian property development sector in the first quarter of 2024. The value of approved real estate development projects continued to decline, dropping 38.8% year-on-year to US$786 million.

This decline follows a short-lived revival in 2023, where investor appetite for real estate, particularly housing, had shown signs of recovery after the pandemic's heavy impact during 2020-2022. However, the World Bank report highlights that ongoing housing price corrections, despite a limited supply of affordable housing, continue to dampen construction activity.

The slowdown is particularly evident in Sihanoukville province, which experienced a rapid construction boom before the pandemic. Approved property development permits in the province fell by a staggering 54.7% year-on-year to US$77.3 million during the first quarter of 2024.

The report also reveals a shift in investor focus. While the total approved development area declined by 34.8% year-on-year, the approved industrial building area bucked the trend, rising 33.6% to 0.67 million square meters.

This significant increase, representing 33.6% of the total approved area, suggests a potential shift in investor appetite towards production and manufacturing activities. Conversely, approved areas for residential and commercial properties declined sharply, with residential dropping to 0.77 million square meters (39.1% of total) and commercial down to 0.13 million square meters (6.4% of total).

This trend suggests a recalibration within the Cambodian property market, with investors potentially seeking opportunities in industrial development as residential and commercial sectors face ongoing challenges.

However, World Bank forecasts Cambodia's economic growth to reach 5.8% in 2024, driven by a surge in exports and a rebound in service industries. Their recent Economic Update highlights a pick-up in economic activity during the first quarter, despite lower domestic demand.

The report credits rising foreign investment in manufacturing and agriculture for contributing to the recovery. Additionally, inflation fell to zero in March due to lower food prices, and the current account achieved a surplus in 2023 thanks to a narrowing trade deficit and increased tourism revenue.