Published on Bangkok Post dated 2 December 2012 written by Aliwassa Pathnadabutr, Managing director of CBRE Thailand
The Phuket resort residential sales market has moved in phases since the 1990s but has experienced a slow down since the 2008 global crisis, given the market’s dependence on foreign demand. CBRE believe the market is now ripe for another positive phase of development which is characterised by changes in the key players, the product, as well as the buyers’ profile.
The Developers & Key Players
Previously, smaller foreign developers have dominated the market pre-2008. These developers were generally less well funded and relied on buyers’ deposits for construction. Post the global crisis, the developers found it difficult to survive in a competitive market with weaker buying demand, consequently many projects were suspended or put on hold.
Today, the market is driven by larger-scale professional developers, both Thai and foreign; many of which are publicly listed Thai companies. The shift in key players is an important element which helps to raise the degree of the market’s professionalism. Many Thai developers have had interests and launched developments in Phuket. For example, Supalai, SC Asset, Sansiri, Land & House and Plan Estate have all been involved in the Phuket market, but their primary focus has been affordable mass market products which primarily target the local market, not the resort home market.
This year, a number of established Thai developers have turned their head to Phuket and in particularly, targeting the resort home market. These developers include Sansiri and Amari Estates (a subsidiary of Ital-Thai). Both developers will soon be launching condominium projects which will predominantly target foreign buyers.
The Buyers’ Profile
Along with the shift in key players, growing tourist numbers also mean a greater potential for new sources of resort property buyers and the new range of buyers from destinations such as China and Russia bear this out. Buyers’ profile will also be influenced by the direct accessibility from new destinations. For example, Emirates will begin operating direct flights from Dubai commencing 10th December. This is in addition to Qatar Airline’s direct flights from Doha. With convenient access from the Middle East, this segment will make up a more significant proportion of the island’s tourist arrivals, and possibly future demand for residential properties.
The buyers’ profiles are shifting and through enquiries generated, CBRE tracks the shift and sees the growing importance of Asian buyers, as opposed to the European markets which previously made up a significant portion of Phuket’s demand.
Whilst Phuket will continue to be driven by foreign demand, we do see a growing opportunity for developers to tap into the Thai market. Aside from products targeting the mass market, we have seen limited Thai interest for resort homes in Phuket. However, this may be set to change as key Thai developers are entering the market. These developers will bring with them an extensive Thai client base and following who may not have previously considered purchasing in Phuket otherwise. For example, Sri Panwa’s initial phase which was launched in 2004 did attract a number of Thai buyers mainly on the back of the developers’ established reputation in the Bangkok market.
In addition to the constantly evolving buyers’ profile, affordability has become an important consideration for buyers, particularly for the resort condominium market. Tracking CBRE’s enquiries, we see stronger demand for the THB 5 to 15 million price range.
Having the right product which is well designed and competitively priced will be the key to capturing the new wave of Phuket demand. Given affordability is an important consideration for buyers of resort condominiums, the unit design and sizing of newer products tend to be affordability driven. Unit sizes are gearing towards the Pattaya and Bangkok development model with more compact unit sizes, although still remaining larger than the city markets’ average to reflect the Phuket market requirements.
One of Phuket’s upcoming projects to look out for is Amari Residences Phuket. Following the success of Amari Residences Hua Hin, the developer will soon launch 1 and 2-bedroom residences located on one of Phuket’s most prime sites which overlook Patong Bay. The project will offer compact unit sizes, ideal both as an investment and lifestyle product.
At the top end of the market, multi-million dollar luxury villas remain a niche for the ultra rich. The product designs continue to be opulent with features such as private lap pools, expansive indoor and outdoor living areas, luxurious master suites and multi-purpose rooms being pre-requisites. Some of the top-end luxury developments in the pipeline include Rosewood’s branded villas to be developed by Hong Kong’s New World and located on the Emerald Bay, Patong. Following the acquisition and re-branding of Bundarika Villas & Suites in Layan to Anantara, the Minor Group is also planning to develop 17 to 20 Anantara branded luxury villas to be priced between USD 3 to 5 million. In the same area, Kajima’s luxury villa project is also currently under planning where the road network and infrastructure is now in place on site.
West is clearly still the best. Whilst prime west coast sites are scarce, projects launched in these locations will continue to do well as it remains the key area sought after by resort property buyers. West coast areas from Karon up to Bang Tao have been the core areas for residential developments. Today, the areas north of the airport such as Mai Khao are now playing catch up. The development of Mai Khao is to some extent similar to Bang Tao with the launch of Laguna Phuket, but in a more advanced phase given the area already has a number of established five-star hotels including Anantara, JW Marriott and Renaissance. As an area for residential resort homes, Mai Khao is just emerging with the recent acquisition of a new development site by Sansiri.
As the high season is kicking in on a positive note, both in terms of exciting new launches and the ever growing tourist arrivals, we believe this upbeat trend will continue into 2013.