Phuket market stays resilient despite turmoil

Investment-led buying and strong tourist interest are aiding demand in the region

The Phuket property market is expected to show strong growth despite political instability and slower economic growth in Thailand, research by property agencies showed.

Property-consultancy company Colliers International Thailand managing director Patima Jeerapaet said Phuket is attracting professional investors and international hotel brands. Phuket’s fast-growing real-estate market is supported by a strong tourism market. Phuket is also an attractive retirement destination. Thus, the increase in interest from overseas in purchasing property has, to some extent, aided economic recovery in Thailand.

The company’s research head Risinee Sarikaputra said the number of residential units for sale in Phuket recorded a peak in 2006, with 1,473 units for sale. The figure dropped last year with 44-per-cent decrease compared to 2006, due to political instability in the country. This year, that trend has been reversed.

The majority of property investors in Phuket are expatriates based in Asia, particularly Hong Kong and Singapore. Phuket is becoming popular with property purchasers from many new markets, such as Russia, Korea, the Middle East and India. Their decision to purchase a villa or condominium tends to be investment-led and they are looking for potential capital appreciation and possibly rental income. Property-sales transactions by foreigners in Phuket tends to be in the form of 30-year leaseholds; there are some sales transactions in the form of freehold, especially for condominiums.

Location, the branding of residential units and property management remain key to commanding high prices. The projects are integrated with hotels and the hotel manages the residential component. The hotel also manages the letting out of the property, or part thereof, on behalf of the owners, generally through a rental pool system.

Risinee said that from the study, it is evident that land prices in the western and eastern areas range widely. The selling price per square metre in some projects on the eastern coast is actually higher than that on the western coast, although the land price per rai in the western areas is Bt35 million per rai on an average, while the land price in the eastern area averages Bt17 million per rai. However, the selling price of residential units in the eastern area shows the average price of about Bt130,000 per square metre while the selling price of residential units in the western area is approximately Bt100,000 per square metre.

The east coast seems to be the future destination for high-end developments in Phuket, with three marinas in the area. Two additional marinas, which are under development, raise the area’s capacity to 800 yacht berths.

The marinas benefit the island’s real-estate industry because residential projects generally crop up around them. Such a facility might be necessary for Phuket’s tourism industry to stay ahead because one of its regional rivals, the Malaysian island of Langkawi, may develop facilities for megayachts.

CB Richard Ellis Thailand, the country’s leading international property-services company, said that the Phuket market is expected to show strong growth, especially in the high-end market, after the upgrade of the Phuket International Airport, which will close to double its capacity by 2010.

Tourist arrivals grew from 2.4 million in 2005 to 4.7 million last year. Roughly 20 per cent of foreign tourists to Thailand last year visited Phuket.

Infrastructural improvements have also helped fuel demand. Phuket has three marinas, with another three slated for completion in the near future. The island’s six golf courses include The Blue Canyon Country Club, the three-time host of the Johnnie Walker Classic.

At a glance

  • Phuket is attracting professional investors and international hotel brands.
  • Residential-unit numbers in the region are expected to bounce back after a slump last year.
  • Location, branding and property management remain key to commanding high prices.

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About the author

Somluck Srimalee Somluck Srimalee
Somluck Srimalee is a journalist with The Nation, Bangkok's independent English language newspaper and specialises in the property and real estate sectors.
Other posts by Somluck Srimalee ( 16 )
Website: http://www.nationmultimedia.com

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