SOME PROPERTY INVESTMENT ADVISE FOR THE CURRENT MARKET SITUATION
Finding the most suitable property in today’s Phuket Real Estate market takes some research and evaluation. Following are a few points that might be able to help you to choose the best location and best type of Phuket property to fit your expectations and requirements.
Investing in a property in Phuket can have several goals. This includes buying a Phuket property with the intention to generate rental returns, capital appreciation and short term speculation. Yet, one thing remains clear. For foreign visitors, as has been the case for some time, prices for Phuket properties remain tempting.
The Managing Director of the Agency For Real Estate Affairs, Dr. Sopon Pornchokchai recently said “prices in Thailand are still low compared to those currently seen in other markets in the region. Even Vietnam is more expensive on average than Thailand, and so there is good potential for healthy investment returns.”
The prices remain relatively low, despite the fact that the country’s economic foundation is quite sound. Thailand appears to indeed be riding out the economic storm with unemployment at lower levels than expected and with most asset classes gaining ground.
‘Property prices did not increase at the same pace as they did the previous years due to political uncertainties, but buyers who buy now at current market value will be in a good position to achieve very good ROI.” Khun Pornchokchai said.
The Thailand property market is diverse, providing interested investors with both city center and resort options. In the residential sector, villas and condominiums/apartments are the most popular vehicles for generating rental returns and capital appreciation.
As for the type of properties that suit foreign investors the best, condominiums remain the more secure option.
This is particularly so for Bangkok where condominiums in the center of the city are a safe bet over the longer term, enjoying the unique advantage of prime location. Property in prime tourist destinations such as Phuket, Samui, Pattaya and Chiang Mai, is very attractive to foreign buyers.
“Whilst property in resort areas may have the potential to sustain higher vacancy rates as compared to the city center properties, there could well be some opportunities available that will provide good capital appreciation over the medium and longer term.” Khun Pornchokchai added.
With many overseas tourists experiencing a resort environment as part of their visit, the reason for their purchase may well be for personal use as well as rental, in which case vacancy rates are not really a major concern.
Today’s Phuket Property Market
With debt and equity effectively sidelined, there is tremendous value in the Phuket property market that has not existed in the past several years. According to Bill Barnet, Managing Director of C9 Hotelworks, property remains a cyclical business. So, while it could be a long recovery, it will be upward. “Appreciation will not be 20-25% per annum anymore like in the years when property in Phuket was booming. Investors have to be pragmatic and look at the longer term. Nevertheless, there is some very good buy low, perhaps sell high properties coming into the market, both new and re-sales”.
Secondary sales during the first half of 2009 were a significant part of Phuket’s transaction volume and it is expected that both re-sales and rentals will grow as the Phuket Real Estate market matures over the next couple of years. Rental yields in resort areas are traditionally volatile and depend mainly on tourism. “Most buyers of luxury properties in Phuket only want to cover the running costs. But for smaller investors, who may look at promised levels of yield, supply is presently outstripping demand, so in reality, resort grade property is best viewed as a longer term property play” Barnett added.
Many experts are still of the opinion that the economical recovery is on the way and that once people have some spare funds available again, they will again choose Thailand as the place to spend their holidays. This will then in return continue to drive sales and rentals of properties in Phuket. Over the past few years, Thailand/Phuket has proven to be very resilient to all sorts of challenges (9/11 when everybody was afraid to fly, chicken flue, SARS, Bali bombings, 2004 tsunami…) and fundamentally remains a very attractive destination.
At this moment works at the Phuket International Airport are underway to expand the airport so it will be able to receive 12,5 million visitors each year. This amount of visitors is expected by 2012. All these people will need accommodation, so although the past few months were low, sometime soon things will pick up for the hotel and Phuket villa rental market.
When it comes to financing, options for getting a mortgage for buying a Phuket property remain almost non-existing. Some individual owners are opening up to the idea of selling their property on a payment term, which makes it easier to close a sale. But developers generally still prefer a cash discount to a long payment schedule so there are still very limited developer finance options.
Despite these obstacles, supply and demand fundamentals for the high-end property in Phuket are continuing to strengthen, with excess supply being snapped up while macro issues constrain demand for new product launches.
“Overall market recovery prospects are being set back to 2011.” Bill Barnett said. “But there has been a continued gradual upswing in activity, driven primarily by an earlier than anticipated momentum in many of the financial source markets where potential overseas buyers for property in Phuket originate”.
Recent research carried out by Bill Barnett’s C9 Hotelworks revealed that the existing stock of luxury villas in Phuket is valued at 10 billion Baht, with 92 units currently on the market. In the period between January and June of this year (2009), 19 properties got sold, while the re-sale market emerged with over 1 billion Baht in transactions. The report concludes that continued tight equity and debt market will limit new developments, while barriers to entry, highlighted by very limited ocean or beach front land, indicates very positive long term stability. Furthermore, re-sales, rentals and an emerging fractional ownership market will create wider investment opportunities in the near to medium term.
