Thinking about investing in Cambodian real estate? Maybe think again.

Before beginning my article about why you should avoid Cambodia-based property, I would like to make a few disclaimers. Firstly, the organization I represent sells property, insurance and pure financial products and hence profits from all types of investments. Therefore, no conflict of interest exists. Second, I am not denying that some people have profited from Cambodian property in the past, and some will in the future.

With that out of the way, I would like to speak about the main reasons why property in Cambodia should be avoided. The first thing to consider is, why are you thinking about investing in Cambodian property in the first place? Is it because your Khmer wife or husband is always speaking about it and nagging you about it? That is hardly a reason to invest nor is a `dream` property. You should invest for rational reasons, not emotional ones.

That brings me onto some of the more emotional reasons people invest in property. Many people believe in unfounded and false ideas about property including the idea that property has outperformed other asset classes historically, which is simply not true.

Equities (stock markets) in developed countries like the US have consistently outperformed other options including cash, government bonds, and can be invested in from a very low monthly amount. Long-term investors and those investing monthly into the market do not need to care about short-term volatility such as a market crash; in fact they benefit from that.

Diversification is important and having one house to call your home isn’t a bad thing assuming you don’t go mad on home improvements, refuse to take a better paid job because you don’t want to leave your home and having stretched yourself to buy in the first place.

Notwithstanding the fact that most house owners seem to fit into those three categories at some time in their lives, you have to then ask why Cambodia? Why South East Asia for that matter? When you have cheap and good value property in many US cities and in some parts of Europe such as Berlin, which has good potential to appreciate in value and are run from well-regulated markets where the rule of law exists, why are you thinking about investing in Cambodian property?

If you are really going to settle here, it may we worth purchasing a bargain home if it is cheap. But given the current trends around the world, including the fact that hot money is flowing back into the United States now that record amounts of QE have now stopped and interest rates seem set to rise in the US and maybe the UK, this isn’t the time to be investing in any emerging market.

Cambodia does have many advantages compared to nearby countries. It is cheaper, on average, for homes compared to Thailand, Indonesia, Vietnam and most other South East Asian countries. Laws (for now) are less protectionist for foreign investors. The US Dollar is used extensively, which reduces the risks of the house price depreciating in USD terms. And yet there are better investment options out there.

Even if you want to invest in property, investing in a liquid low-cost pension fund is more effective. Look at it like this. Nobody can predict markets. It is close to impossible to beat the market consistently for years. In other words, it is very difficult to consistently and sustainably beat the average rate of return.

You might beat it in the short term or get unlucky and do worse than the average. However investing in a low-cost fund that tracks hundreds of construction and building companies worldwide or has invested directly into hundreds of properties, is a much safer way of benefiting from a bull market from property.