After three decades of recovery following the genocide committed by its former leaders, Cambodia now finds itself in the midst of a real estate boom. Only ten years ago Phnom Penh didn't even have any traffic lights, but now apartment buildings and office blocks are changing the cityscape as international investors enter the local property market.

Private-equity investors – often the clearest indicator of property hotspots of the future – are investing big in Cambodia. Most of these shrewd customers are looking to Phnom Penh's buoyant property market.

A survey by the Agency for Real Estate Affairs (AREA) last month suggests that the Cambodian capital's real-estate market has potential for growth this year. By the end of January this year, 90 new residential property projects comprising 25,596 units were launched in Phnom Penh. The total worth of the projects was US$2.09 billion (of these 66 per cent, or 16,823 units, were sold at an average price of Bt2.6 million).

At least four new private equity funds are also aiming to bring a further $475 million of foreign investment into Cambodia. China, South Korea and Malaysia have been pouring money into the country, and in 2006 foreign direct investment totalled $2.6 billion. According to Cambodia Investment, more than $6 billion may be invested into the country over the next three years.

The flow of property investment into Phnom Penh from overseas is being encouraged by the Cambodian government, with both the ruling Cambodian People's Party and the main-opposition Sam Rainsy Party committed to the same pro-business, pro-growth policy platform. Cambodia's economy has been expanding rapidly as a result; by 9.6 per cent in 2007, and by more than 10 per cent per year during the previous three.

The Cambodian capital may also be the prime place for investors to consider buying holiday homes and buy-to-let investments. Tourism arrivals have been growing alongside the property market, with two million arrivals in 2006, and a further 20 per cent growth seen in 2007.

Meanwhile Monocle magazine recently named Phnom Penh as one its 'Winning Losers' in an Affairs Report on the world's best places to live. Though it did not make the magazines top 25 list, the Cambodian capital was commended as being a great place to live and one for the future.

Yet Phnom Penh property may only be seeing the beginning of its growth. Property prices are cheap but are moving at pace – a traditional shop house along the river that sold in 2006 for $300,000 is now selling for $600,000 to $700,000.

Overseas property agency David Stanley Redfern is currently selling apartments in the riverside French quarter of Phnom Penh from as little as £49,000. The authentic French colonial period buildings have been completely refurbished and modernised and are expected to appreciate by 15 to 20 per cent per year. The developer is offering a rental guarantee of 10 per cent net for the first two years.

A steady flow of investment may well polish the rough edges of Phnom Penh's property market and once again turn it into the 'Pearl of the East'.

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Article first published 2 July 2008