A Bump in the Road for the Phuket Housing Market

Developer John Gold is confident

Developer John Gold is confident

Sales are being affected by a lack of credit options for overseas buyers

Phuket has come to be known as the island of million-dollar homes in light of heavy investments by wealthy foreigners in recent years. The growth is at the high-end property market at the moment, though pockets of activity remain. John Gold, developer of the Casuarina Shores apartment project near the Bangtao Beach Gardens, which he completed earlier on the west coast, offered his views on the present state of the market.

Q: How is Phuket coping with the global economic crisis and the ongoing political problems within the country?

Unlike anywhere else in Thailand, the Phuket property market experienced a 12-year uninterrupted boom. Against the backdrop of recent depreciated global equities and property values, the island has suffered a major setback in terms of at-home credit available to interested overseas buyers.

This, compounded with perceived political instability, has resulted in a stall in the market place.

Q: What is having a stronger impact - the economic woes or political turmoil?

The global credit press is certainly the most important factor at play here as foreign investors never had a real way to access credit from Thai banks, which are in relatively good shape compared with their western counterparts.

Q: Are Hong Kong and Singaporean buyers having second thoughts about investing in Phuket?

The American and European lending logjam has served to keep regional investors on the sidelines, awaiting the fall out. However, Hong Kong, Singaporean and other neighbours are already starting to circle the market in hopes of snapping up bargains. They have remained patient and are wise to the temporary situation in the country, knowing Phuket will continue to be a place where people want to holiday and retire. Obviously, it’s a buyer’s market and the focus is on recently completed or soon-to-be completed properties.

Q: Although your company is very strong, do you know of others that are foundering? Are projects changing hands and will some of them not be completed?

Yes, timing is everything now. Despite the fact some developers were able to secure a prime location by the beach two or three years ago, they have been squeezed by the shift in momentum of buyers now cautious or without credit. Unfortunately, these projects will either not be completed or the last to be completed as buyers will focus their attention on newly realised situations, not hugely discounted off-plan dreams. The speculation has been take out of the equation. This is good news as no one wants a half-finished property to consider.

Q: Have the current troubles affected all segments of the Phuket market?

Yes, inventories exist in all segments of the market. Many projects are in a holding pattern and developers are looking for the light at the end of the tunnel.

Q: Have prices dropped in Phuket, and if so by how much and is it across the board?

ONLY A FEW LEFT: The Casuarina Shores

ONLY A FEW LEFT: The Casuarina Shores

Advertised prices have not dropped. However, actual median transaction prices of villas and apartments most certainly have. Again, buyers are making discounted offers either directly to the developer or through their estate agents. Just as important, investors have also recently been able personalise their terms, effectively creating a short-term mortgage. With respect to the property spectrum, raw land prices have not decreased but the number of listings have lessened as many local land owners have simply taken the holding off of the market.

However, the developer of say, a villa neighbourhood or an apartment/condominium complex, is now more often than not in need of capital to continue or is just anxious to complete.

Q: When do you think this market will pick up again and what steps should the government implement to help?

We are at the bottom of the market. I can say that because the because the number of transactions in the last six months is near zero. Although many overseas buyers have stayed on the sidelines or have been forced to work for an extra year or two, they have still chosen Phuket as their ultimate retirement or long-stay destination. I think market forces will play the most important role in Phuket’s property situation returning to normality. The market was absolutely unaffected by the 1997 regional economic meltdown, the Sars scare or even the 2004 tsunami.

Ultimately, the improving infrastructure and the fact that as an island, Phuket has limited prime sites, will help it out of any short-lived global market correction.

Having said that, obviously the more stable a government is, the more secure investors are.

The closing of the Bangkok international airport in November was unfortunate, however Phuket is somewhat of a destination of its own and is geographically and politically distant from the happenings in the capital. Although many international travellers will always have to pass through Bangkok en route to Phuket, an increasing number of regional arrivals will land directly in Phuket. The immediate expansion of the airport facility and increased flight arrivals, including Air Asia’s plan to make Phuket a new hub for Southeast Asia, will only make it more attractive to investors.

Q: How is Casuarina Shores doing?

Again, timing is everything these days. We were extremely lucky to recently complete construction of the project and only have a handful of apartments remaining for sale. You have to be lucky sometimes.

Q: What are your future plans?

The timing is right but we will have to patient for the right land to surface.

About the author

Nina Suebsukcharoen Nina Suebsukcharoen
Nina Suebsukcharoen is a senior journalist with The Bangkok Post, Thailand's first English language newspaper and specialises in the property and real estate sector.
Other posts by Nina Suebsukcharoen ( 26 )
Website: http://www.bangkokpost.com/

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