PHNOM PENH (Reuters) - After decades of war and upheaval, including the Khmer Rouge "Killing Fields," Cambodia is enjoying an unprecedented boom, its economy expanding at around 10 percent annually for the last five years.
But the breakneck growth, fuelled mainly by garment manufacturing, tourism and real estate development, is turning its once-sleepy capital into a building site and forcing many ordinary Khmers from their homes.
"I will move only when they pay me enough to find another place to live," said 49-year-old Ngay Tun, a fisherwoman living on Boeung Kak, a 120 hectare (300 acre) city-centre lake about to be drained and filled in to make way for a housing project.
"I worry about it every day, that they are going to come suddenly in the night to kick us out," she said, paddling a small wooden boat through floating banks of morning glory.
While the outlook for the garment industry and tourism appears solid -- especially while the U.S. dollar, Cambodia's de facto currency, continues to fall -- the same cannot be said for real estate, where prices are spiraling to dizzy heights.
Figures from Bonna Realty, a leading estate agent, suggest the price of prime Phnom Penh land doubled last year to $3,000/sq m -- compared to less than $500 in 2000.
By contrast, land in Bangkok's downtown Silom district is $5,000/sq m, while Ho Chi Minh City, the hub of neighboring Vietnam's red-hot economy, prices can be as high as $15,000.
"There is a debate about whether there's already a bubble," World Bank country economist Stephane Guimbert said.
"On the one hand, clearly the market was very depressed until a couple of years ago because there was little security and stability. But on the other hand, it's surprising that prices are increasing so fast," he said. In one of the first signs of overheating, annual price inflation has spiked to more than 9 percent in the last year, almost double its level in the preceding five years, and anecdotal evidence points to big upward pressure on wages.
At the top of the market, prices are being driven by huge foreign-funded ventures such as "Gold Tower 42," a $300 million South Korean apartment block which, at 42 storeys, will be three times higher than Phnom Penh's current tallest building.
Even though it will not be ready until 2012, Cambodia's super-rich are already snapping up some of the 360 units on offer at $2,150 a sq m, only a shade cheaper than Ho Chi Minh City.
But such prestige projects are the tip of the iceberg, and foreign funding accounts for only a fraction of the boom, analysts say.
The domestic financial services industry is growing fast -- private sector lending by Cambodia's 20-odd banks grew 60 percent last year -- but remains too small to be funding projects to the tune of hundreds of millions of dollars.
Instead, analysts say, much of the funding is Cambodian cash stuffed into mattresses, locked up in gold, or squirreled away in anonymous offshore bank accounts for years.
"There are a lot of people in this town who are fantastically wealthy," said Trent Eddy, director of Phnom Penh-based Emerging Markets Consulting. "The banks are not doing mortgage lending for the sort of stuff that's driving up prices."
The most popular theory on the streets of Phnom Penh is that a global banking clean-up after the September 11, 2001 attacks smoked out billions of dirty Cambodian dollars sitting quietly in bank accounts in Singapore, which encouraged its repatriation.
With few other investment options, and a steadily improving regulatory and legal framework -- not to mention political stability under ex-Khmer Rouge strongman Hun Sen -- real estate is the obvious choice for the prodigal loot, so the theory goes.
Even though the economy remains one of Asia's smallest, with a GDP of around $6.5 billion, the hype is such that international portfolio investors have been looking into setting up domestic real estate funds, mainly in the hotel sector.
U.S. property services firm CB Richard Ellis is also hoping to get in on the action with the opening of a Phnom Penh office in the next few months.
The prospect of revenues from off-shore oil and gas by 2010 reaffirms the view of outsiders that the economy is only heading in one direction, and that rapid urbanization and demand for better housing from Cambodia's 13 million people must follow.
The clearest example is another South Korean venture, a $2 billion "new town" called Camko City taking shape on the northern outskirts of Phnom Penh.
"They are targeting primarily the Cambodians. There's very little accommodation in Phnom Penh, but demand is growing," said Lee Sangkwang, commercial attache at the South Korean embassy. "It's kind of pioneering."
The changes, however, are not coming without costs.
The city's infrastructure, already in a dilapidated state after nearly three decades of civil war, is creaking under the weight of the expansion, with roads clogged by traffic, leaking sewers, and frequent floods and power blackouts.
Critics also point to a lack of transparency and vision in urban planning -- despite assurances from Mayor Kep Chuktema that he "listens to the views of all stakeholders."
Social tensions are also emerging, with many city centre communities living in fear of eviction and pop songs lamenting the growing obsession with property speculation and the desire to make a quick buck.
"Now, the war in Cambodia is over land," said tuk-tuk driver Ros Sopheak.
Editing by Michael Battye and Megan Goldin