Phuket is located in the southern section of Thailand. It consists of an island – Phuket – and a capital city, called Phuket City. In some cases, the title can refer to either the island and province or the city itself. In the case of real estate, we’ll be discussing the entire island. Between the fourth quarter of 2016 and the first quarter of 2017, the most recent periods for which we have information, the real estate markets have remained somewhat slow.
Low End Properties Are Being Purchased
Since this segment of Thailand is known for being a large tourist destination, it should be no surprise that the majority of properties being purchased are resorts. Many of the people buying them are planning to rent them out, so they look for properties that don’t cost a lot, but will give them a decent return on investment. Unfortunately, this means that the market for higher end resort properties has slowed to a crawl. Of course, lower end resort properties in this section of Thailand are those that sell for between three and 35 million THB for villa units, and under 8 million THD for condominiums, so the prices are still decent.
Foreign Investors and Expatriates Have Stepped In
In many areas of Phuket, the main buyers are either foreign investors and expatriates. They see the investment potential of owning properties in Thailand, and believe that they will see a return on their money within the next three to five years. Some of the foreign investors are from Russia, China, and Japan, as well as other countries in Asia. Not all of them plan to simply rent out their properties however. Some stay in them for personal use for a few months out of the year, then rent them out tourists the rest of the time. This isn’t frowned upon – in fact, it is welcomed, as these properties find owners and are used. They don’t stay on the market for long periods of time.
Many of the upcoming construction projects in the Phuket province of Thailand are designed with these specific criteria in mind. They are somewhat high end resort villa and condominiums that will be aimed at investors to rent out, not residential properties for the people living in the region. Construction began on two such projects during the fourth quarter of 2016. One will be a mid-level set of villas, while the other is at the entry level. In the first quarter of 2017, six new projects were started. Four of them are at the entry level, while the other two remain in the mid-range, price wise. The main price for an entry level villa property of this type in Phuket is less than 15 million THB, while the prices for mid-range are between 15 and 35 million THB. The fact that only these lower property tiers are being created show that the developers are paying attention to the market and only building what they think they will sell. You won’t see any extremely high end priced properties under construction at this point in time.
Sales Are Improving For Villas, But Not Condos
Despite the apparent market stagnation price wise, things are on the upswing in Phuket. When looking at sales figures from the first quarter of 2016 and comparing them to the first quarter of 2017, two things are apparent – more people are buying rental properties, and Russian buyers have come back. Only 72 villa properties were sold in the first three months of 2016, while 103 were sold during the same period of 2017. This is an indicator that things might be on the upswing. It also might be a sign that the developers are creating exactly what the buyers want. When comparing condominium sales during the same period, things look slightly different. Eleven percent fewer condos were sold the first quarter of 2017, as opposed to the same time in 2016.
Russian Buyers Are Back
As previously stated, Russian investors are back and are buying Phuket properties. Their return is due mainly to the conversion price of the Ruble to the THB, meaning that they get more for their money in Thailand. This is a welcome turn of events, as they, along with Chinese buyers, tend to purchase several properties at once. These are then either resold for a profit at a later date, or used solely as rental units for tourists.
The Phuket, Thailand real estate market is at an interesting point. Buyers favor lower and mid-range priced resort properties that they can rent out to visitors. Although some of the buyers tend to spend around 60 days a year in their own units, they make a tidy profit off of rent for the rest of the year. Developers have noticed this and are building accordingly.
Author Bio : This guest post is written by John Parker promoting CBRE Thailand.