Is Phuket property overpriced?

Patang Beach Phuket

Patong Beach Phuket

With Phuket’s residential market now firmly in the grip of economic downturn, developers must drop their prices in order to attract buyers and ensure a timely recovery, according to one local agent.

“We need a visible display of reality,” said Andrew Hunter, managing director of Hunter Sotheby’s International Realty. “Prices have to adjust to invite people back in.

“There is only one way to encourage buying support and clear the market - price. Whilst price adjustments might not have an immediate impact at this time of severe economic uncertainty, it would be catastrophic if, when the macro economic environment finally stabilizes and turns, Phuket was not in a position to exploit this,” said Hunter.

A price adjustment today is an opportunity to negotiate the supply and demand imbalance“If some developers do not grasp this nettle quickly, then they will not be around to cross the finish line. A price adjustment today is an opportunity to negotiate the supply and demand imbalance created by the trauma of Thailand’s socio-political instability and the global macro issues. When assets across the globe are undergoing value adjustments there is no discredit in seeing the same occur here – in fact, on the contrary, the message can be a positive one – Phuket is operating in a mature and responsible market.”

To date, Hunter said he had not seen many headline prices reduced, but he had noticed a number of ´offers´ on the table, with developers “having to be very creative and flexible on pricing.”

While not all agents on Phuket agree that the market is overpriced, most have noticed that developers are now offering more incentives to attract buyers.

Luc Montens, managing director of Tropical Properties, said that to his knowledge only one major developer had significantly dropped their prices, but many are offering incentives to buyers.

“More and more developers are becoming flexible with their payment terms or even offering financing spread over several years. Others offer free furniture packages and/or offer to pay for registration and transfer fees,” he said.

Agents Phuket Ocean Villas recently advertised a series of deals including a “25 percent discount on purchases”, “buy a two bedroom pool suite and get a studio for free”, and “a free Toyota Yaris” upon purchase.

by Stephen Small
Revised: 19 February 2009

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