Property

Isle of Might

Isle of MightThe S-factors — sun, sand and sea — that make Phuket a perpetual favourite among investors and second home purchasers have made the market a resilient one despite a dip in the last few years. The island in southern Thailand, approximately the size of Singapore, has been a hotspot for Europeans for decades, and in the last ten years or so has sprung to the fore among Asian travellers. There are few major multinational hotel brands that don’t have a presence on Phuket, and with tourist arrivals increasing by 30 percent in the first half of 2012 (according to the Tourism Authority of Thailand) that doesn’t look likely to change any time soon. The Thai Baht still favours visitors, and even with prices rising in general, Thailand is good value — for everyone from gap year backpackers and luxury vacationers.

On the residential purchasing front, Colliers International reported in the middle of 2011 that, “The boom days of Phuket have yet to return as foreign buying activity remains sluggish but has been picking up over the past year. Greater concentration on the domestic market continues with more affordable developments away from the coast.” The global agency’s Phuket Residential Report noted condominium developments inland were on the rise (5,500 new units would come on the market by 2013) and that local Thai buyers were starting to enter the market as well.

After a rocky couple of years, Phuket looks to be weathering the storm and is poised for further growth. On the downside is the ongoing European financial quagmire, which Colliers theorised was having a negative impact on the island’s property market. However, once again, “High net worth individuals come from all nationalities and as such Phuket attracts buyers from a broad range of countries and developers and agents do not normally target one market. While Europeans were the mainstay in the past the buying dynamic has shifted to newer markets such as Russia, Singapore, Hong Kong and the Middle East.” CBRE Thailand’s MarketView for the second quarter 2012 partially agreed, stating sales were steady on the back of limited supply, but agreed on the buyer make-up. “The majority of buyers were still from Europe including Sweden, Italy, and Germany. However, with economic slowdown in Europe, we believe that growing interest from Russia, Australia and Asia can probably offset the lower number of European buyers.”

“The market has been on the soft side because traditionally buyers were European. But what is on the horizon are these huge markets in India and China. They’re becoming more affluent and they’re travelling more. We’re finding demand from these up-and-coming sleeping giants,” agrees Gulu Lalvani, chair and developer of Royal Phuket Marina. “What’s also happening is that Hong Kong residents, for example, are buying a holiday home as well as [a home for use] to send their children to the British International School there … Getting a school here in Hong Kong is difficult. So that’s a buyer segment we’re looking at.”

Also buoying the future, and continued growth, is the rising number of direct flights to Phuket and the expansion of the airport, scheduled for completion in 2015. Phuket is second only Bangkok for passenger arrivals in Thailand and currently serves Aeorflot, Asiana, Qatar, Emirates, Jetstar, Virgin Australia and dozens of other airlines. Lalvani is among those who see the market recovering and staying strong down the road, so much so that he’s expanding the Marina. Between second homebuyers and yachting enthusiasts having a hard time finding berths, Phuket will be in a solid investment position for years to come.

But there are threats to Phuket’s dominance in the luxury residential resort sector, among them Bali, Cambodia and its dozens of coastal islands (like the massive development planned on Koh Rong), Vietnam and perhaps Myanmar, or Burma. “Long isolated from engagement with the West, an opening up of the country alongside an ending of sanctions and coupled by an effective property law could lead to tourists visiting this richly endowed country in droves and later to become buyers. It is by no means guaranteed that Phuket will remain ahead of the game,” reasoned Colliers. Lalvani is unfazed. “None of these have the infrastructure that Phuket has. In Bali you can walk somewhere faster than you can in a cab. None of the islands off Vietnam or Cambodia have the sailing facilities Phuket has. Hainan has one marina and you have to get permission from the government the day before to go out. What kind of fun is that?” Phuket may have to work a little harder down the road, but utter collapse is unlikely. The word is still Sawasdee for investors.