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Hong Kong Money Flows into Cambodia and South Korea Property Market

Jun 21, 2018 | Asia, Cambodia

The increase in prices of properties in Hong Kong does not seem to halt. Troubled investors now are looking for greener pastures in Cambodia and South Korea.

But investments in foreign markets are never free of risks. What one needs to cope up with that is a study of the market trends. As experts suggest, one must observe the government policies and taxes very closely to keep their funds protected.

Kerry Wong, chief executive officer, Greater China, of REA Group, explained that the rise of price in Hong Kong has been the main motivator behind the growing interest for these markets.

According to our economist’s report, Hong Kong is at least two or three times more expensive (than Phnom Penh or Seoul),” she said.

Wong expects Cambodia and South Korea will be receiving more investments in infrastructure as a part of China’s ‘Belt and Road Initiative’. The growth should deepen these countries relations with other Asian and Eurasian countries.

According to The Phnom Penh Post, there will be a drop in prices of mid range and high-end condos by 4 per cent. The Cambodian Government initiative has ensured a rise in supply of condos by 20 per cent, 12000 units in the capital. This is expected to directly prompt the drop in prices.

According to the President of Taiwan-based Ho Hsin Development, George Hsieh, their luxury project, The View, in Phnom Penh’s BKK1 district has been popular among foreigner buyers. The project has 320 units, of which 280 were pre-sold. Each unit is priced at US$100,000 to US$300,000. Most of the buyers were Japanese, Taiwanese, Hongkongers, mainland Chinese, wealthy Cambodians, as well as Australians, and French nationals.

Cambodia Property Market
South Korea Property Market

Hseih further explained that as Cambodia has no foreign currency control and most of the transactions happen in US Dollars, “Capital from other countries can freely enter and exit and therefore it is very suitable for property investment at the moment.”

The Cambodian government has made initiatives to adopt local riel in the economy but US Dollars are used wisely. “In addition, there are 31 countries enjoying zero tariffs in Cambodia [and because of this] many countries are very active in investing in [Cambodian] properties. Most of the foreign investors come from Hong Kong, China, Japan, Singapore, Korea, Taiwan, and so on,” Hseih said.

In Seoul, the situation is a bit contrary. Here tenants have to pay a large sum of money to the owner as advance. Karis Hui, chief financial director of Do B Global Property Investment, said: “After confirming the rental contract, tenants need to pay a large amount of money to the landlord in advance, which is like lending money to the landlord. Instead of paying interest to the tenants, the rental fee is deducted from the total amount of money paid in advance.”

The fifth highest tower in the world, Lotte World Tower, houses multiple properties. Do B Global promotes The Signiel Residences, a part of the tower for investments. According to Hseih, The units, with an average size of 2,000 square feet to 3,000 square feet, are sold at HK$20,000 per square foot. You can’t really buy something like this in Hong Kong. Korean property is not cheap, but also not expensive compared to Hong Kong’s.”

But as Wong, emphasizes once again, any investor must be cautious about the governmental policies and tax system to secure their investments – “You do need to understand as a foreign investor what are the regulations and restrictions that you will be subject to. They should also be looking at tax regulations for foreign investors.”

According to Hseih, Cambodia is safer and more profitable in property investments since it has no capital gains tax whereas Korea kept a levy on it. But in Seoul, luxury house prices rose 4.8 per cent in the first quarter of 2018.

The Knight Frank report which carried the data also mentioned that the Korean government has been seeking boost in housing supply as it released the plan with a promise for a million more homes in the next five years.

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