Property prospects for Phuket and Krabi

Impact on Thailand’s property sector by the global economic crisis, and what to watch for in southern Thailand during 2010.

Nick Anthony and Tom Travers of Indigo Real Estate discuss how Thailand’s property sector has been affected by the global economic crisis, and what to watch for in southern Thailand during 2010.

Phuket shakes off the world economic problems
The global financial crisis will rumble into 2010 and will create more surprises. The United States is still in deep trouble, Europe is fracturing and Africa is unstable.

In Phuket most projects went into the global financial crisis under duress caused by the previous two years of political instability, so most developers have escaped the worst of the speculative excesses. Developers have been offering attractive incentives in the final quarter of 2009 that have helped to thaw the standoff from buyers.

An end to the Mexican standoff
After an eerily quiet nine months in terms of actual deals, and despite a constant stream of interested wealthy clients visiting Phuket throughout the global financial crisis, there has been an upturn in negotiations and an increasing number of transactions, although prices remain unpredictable.

The reduced prices on offer from sellers is a return to a long term ‘fair valuation’ and is about 30 per cent down from peak prices. However, cashedup buyers have been seeking distressed pricing, asking a further 30 per cent discount – but without success.

Today the pendulum is starting to swing back towards sellers because the supply of value-priced finished villas is limited.

Completed, well-managed properties will attract buyers
‘Completion’ continues to be a buzzword in the minds of buyers, with rental programs, solid property management and access to boats and beach clubs highly sought after. Developers, despite not being able to reduce prices dramatically, are being realistic. Sellers of luxury homes are getting fair value prices, leaving buyers with a great long term asset, yield possibilities and medium term capital appreciation of between 20 per cent and 40 per cent.

Completed, well-managed villa projects will continue to outperform other market sectors, and in some cases developments such as Andara, Trisara and the Amanpuri will see their resale prices rising by as much as 100 per cent from just two or three years ago.

An under-supply in the luxury sector
Developers who have shown financial strength and have made solid construction progress will be signing deals that will see the luxury market in Phuket entering a state of under-supply of quality new developments by end of the first quarter. This could well surprise many people. Quality sea view land is becoming scarcer in Phuket, and there will be no increase in this type of land available while finished luxury villas for resale are already in short supply.

The villa rental market will continue to grow
Tourism is down some 20 per cent over 2008 figures, but the high season is now in full swing and all the main hotels are full. Occupancy rates in February 2010 are likely to be close to 100 per cent at many of the 5-star hotels. Virtually every big villa is rented throughout the peak season, and this is despite of a doubling in supply of finished villas since 2008. In 2009 there has been a steady slew of high-end renters, for example some villas in the Surin area have maintained 85 per cent occupancy levels all year at rates of between US$800 and US$4,000 per night.

Buyers are back, but concerns remain
There was a marked thawing in the final months of 2009, with intransigent negotiations that have frustrated all parties throughout the year starting to progress. Buyers, thanks to bullish regional equity rebounds and a relaxation in general global business, have resumed their rest and relaxation mentality. They have started writing cheques again. But political concerns are always a wild card when it comes to Thailand, although Phuket is increasingly becoming more isolated, independent and immune to Bangkok’s volatility.

Phuket remains a top contender in Asia
Places like Saigon are getting jammed by traffic and pollution, and are starting to resemble other overpopulated Asian cities where long term expatriates are leaving. With huge population growth predicted during the next 20 years in all major Asian cities, pollution will only get worse.

In the immediate vicinity we have wealthy investors from places like Malaysia, Singapore and Hong Kong looking for quality of life and a healthier family environment. Those buyers will continue to choose Phuket as the number one alternative place to spend substantial time. Put simply, no country in the region can offer what Thailand can offer overall.

Brokers’ survival is dependant on representing buyers
The Thailand property buyer today is savvy, is seeking value, and is well informed on the range of properties available – thanks to the Internet. Buyers are looking for representation from an agent that presents quality projects and developers with experience, and balance sheets to match their bravado. Agents must be prepared to do battle on their behalf, and with the buyers’ interests at heart. Agencies that are seen as a ‘sellers’ agency – listing all properties at the highest possible price – will lose the trust of customers.

Keep an eye on Krabi province
With good beach front and sea view land becoming rarer in Phuket, buyers are starting to follow the Phra Nang Ppeninsula south to Krabi Province. While most projects in Krabi lack the quality and architectural value seen in Phuket, demand in the market will soon change this. In particular, the island of Koh Lanta has become a contender as one of Asia’s hottest new vacation and holiday home locations. With its large selection of white sand beaches, proximity to world-class dive sites and spectacular boat anchorage, one can understand why this island is attracting so much attention.

Hot projects to watch
Limited completions during 2010 means supply will be tight. Watch for the first completed villas at Istana Phuket above Naithon Beach. It will redefine what real luxury villas are all about in Sia. Gary Fell’s design enjoy superb detailing and will be quite possibly the best interiors on Phuket.

Up at Natai beach Sava is powering ahead towards completion. The roof structures are up, pools being tiled and as a big family home with direct ocean access it doesn’t get much better anywhere in the region.

Mandala Condominiums are now completing and are, unusually, launching sales at the same time. Attractively priced, nicely detailed and with no risk they make an excellent investment property or beach pad, being 300 metres from Bang Tao Beach.

Following the immense success of the exclusive Andara Luxury Villas, the Kamala headland development is now offering Andara Apartments with 2, 3, and 4 bedroom apartment suites. The Taj Phuket is readying for launch in 2010 and will be Phuket’s most luxurious combination of a hotel and managed villas, nestled into three private beaches on Koh Lon Island south of Sri Panwa.

SOURCE: Property Report

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