Phuket, and its surrounding areas, has become one of Thailand’s best-established markets for hotel, villa, condominium and resort-related businesses. Although demand has slowed over the last 18 months, new developments continue to proliferate across the island. In geographical terms, development zones in Phuket can be broadly divided into five areas – north, west, south, east and inland.

With high concentrations of villa development and a resulting shortage of developable sites in the west, the most recent construction has been concentrated in the north, east and southern areas. The east of the Island provides opportunities for marine-related developments and tourism. Some villa developments there, such as The Cape and The Bay have been effectively marketed internationally. It’s anticipated that this area will begin to see more varied development in the next few years in response to the demand from both clients and investors.

Generally, In terms of unit types in all resort locations, two-bedroom configurations comprise the largest proportion, already constructed or currently being built. This design is well-suited to meet the demand for holiday accommodation. Increasingly, such properties are also being purchased on a ‘buy-to-rent’ basis.

The beauty of the beaches in Thailand and the price of land, which internationally is still perceived as reasonably good value for money, continue to be strong attractions for buyers wishing to invest in a holiday residence or second home.

Tourism related opportunities will, of course, continue to be the mainstay of Phuket’s real estate market, for many years to come. The island is now established as a major international holiday destination.

With a growing number of repeat and new tourist arrivals year-on-year, opportunities will continue to exist for all segments of the hotel industry. In the low-end sector, there will always be student and backpacker tourism, as Phuket is recognised as a base for Andaman Sea island hopping. The midrange market segment will see renewed growth once homeland job security is restored. The top end of the market will continue to experience strong demand attributable to the diversification and greater financial stability of the clientele. There continues to be a need for good branding and service delivery in all sectors. The marina tourism segment in particular will see renewed growth when the global economy stabilises.

According to Thai law, foreigners can purchase up to 49% of the saleable area in any freehold condominium project. Eligible foreigners include:

• those with residence permits
• those granted permission to enter the Kingdom under the Investment Promotion Act as investors in a limited company more than 49% owned by aliens.
• foreign juristic persons with Investment Promotion Certificates
• foreign individuals or juristic persons remitting foreign currency into the Kingdom for the purchase of a condominium unit.

The remaining 51% of the condominium area must be sold either to Thai nationals or Thai corporations. In some cases, foreigners who are shareholders in legally defined Thai companies are able to acquire the Thai ownership quota in condominium projects. To avoid complications with this issue, many projects in Phuket offer condominiums on a long-term lease basis for a period of 30 years, which can thereafter be extended for two additional 30-year lease periods. This amounts to a 90-year lease.

These laws are all well known now and generally accepted in the marketplace. It’s always a good thing for developers to ensure that their sales and purchase agreements are very clear, and are understood by the buyers. The developer’s sales staff should therefore be well-versed in the application of this legislation.

A new breed of developers?

We’ve recently seen an increase in both foreign and domestic developers who have adopted a new strategy of selling to the domestic as well as the foreign market. This is already a feature in other resort destinations like Hua Hin and Pattaya. Projects with prices per square metre ranging from THB 70,000 to THB 85,000 are becoming more popular. They offer the same common facilities as developments that were previously built at a higher cost. If the project has good rental programs and is to be managed by a respected service provider, Thai investors will see it as a good choice. Phuket’s status as a mature tourist market seems assured.

Jones Lang LaSalle

Posted under Lifestyle, Property News