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Market Watch - Page 12:

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Low Season - Cyclical Cynics.

 

 

 

Those of us involved in the property business in Phuket over the past six years know that it's been a bit of a wild roller coaster ride, with its ups, downs and in-betweens.

But each year as the rains come and our seasonal market dips to its annual lows, out come the doomsayers with their tired old question: "Is this the end for the Phuket real estate market?" It's been a phenomenon as steady as clockwork and might be compared with the “groundhog” coming out at the end of winter and gives the thumbs up or down for an early spring.

Luckily, we live in a climate of endless summers and to the best of my knowledge there are no groundhogs on this island. Hence, in assessing the market we have to look at something more solid than a furry animal that spends its winters underground. During the past six years, Phuket has experienced spectacular double-digit capital appreciation within the property sector despite 911 , SARS, bird flu, land scandals, a tsunami and coup d'etat. Prices have continued to rise.

Tourism recovered from the post Tsunami low and was close to 80 % last year.

Depending on the source one uses for statistics, tourist arrivals in Phuket soared to five million people in 2006, and year-to-date figures show continued impressive growth for 2007.

In a property market dominated by foreign buyers the holiday market provides as a good barometer as any real estate forecasts.

According to an independent agency for real estate affairs the Bangkok property market in 2007 is expected to be worth 145 billion baht. In 2006, Raimon Land 's research team, in its Focus publication, valued the condominium in Phuket alone to be worth 20 billion baht. Realistically, if we are looking at the total property market, including not only condominiums but also villas, homes, apartments, rental space market value could easily economy, exceed 40 billion baht.

To provide some scale to the market, consider the government figures that show the total spent on books and newspaper in the entire country at 60 million baht, though (bizarrely) the fastest- growing enterprise in the entire Kingdom is amulets, which were fuelled by the recent Jatukham Ramathep craze.

The Kaisikon Bank Research Center has

 

 

 

estimated this market at more than 50 billion baht a year, with the amulets now trading regularly on eBay in the US and Europe .

But getting back to property, from an investment standpoint property in Phuket is a golden child in Thai real estate circles. It continues to be dominated by overseas investors who cannot obtain local financing, which means we do not have the speculative domestic markets that one finds in Bangkok , Hua Hin or Pattaya.

Most projects continue to be built by smaller developers and what is under construction in most cases has been sold already and paid for with no bank leveraging. In the worst case scenario of a meltdown either within Thailand or the region, as in 1997, there would not be significant bank foreclosures, so prices would not retreat on a disastrous scale (as in 1997) and it would be a soft landing.

As the market in time would pick up again the price base in a market such as Phuket would far exceed those in leveraged domestic markets.

As for the national economy, the SET (Stock Exchange of Thailand) remains one of the best buys in the region. In the mid – 1990's the exchange traded up over 1,500 points, but today with all the growth over the past few years, its trading at less then half of that mark.

Its and astonishing fact when comparing it with other major indicies in the regions and should provide confidence for investors in the upside potential here.

But in the words of Jerry McGuire, "We live in a cynical world." It's the same world where businesses made annual business plans that were carved in stone. Today, with technology, we live in a fast-food frenzy of information and reactions. Mar kets can be made or unmade overnight. We now look at CNN, BBC or the Internet and make long ranging decisions with a few keystrokes on the computer.

At face value and by the numbers, the Phuket property looks set for a continued run of prosperity, though, as we all know, business cycles do not run to a set schedule. Certainly from a developing market perspective, the island has grown and will continue. to. see supply and demand lines blur in the coming years.

As for the groundhogs, let's see what the high season will bring.

 

   

Bill Bamett is Managing Director of C9 Hotelworks a Phuket hotel and residential consulting firm With more 20 years experience in the region, he has played an active role in some of the island biggest develovments.

       
       
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Archived Articles: 2007 - 2008

 

Krabi - On The Edge Of A Boom

 

US Financial Crisis - Living The Sub-Prime Life

 

Rental Income - Investment Rent And Raves

 

Aesthetics - Out With The New, In With The Old

 

Hotel Branded Realestate, Battle Of The Brands

 

Local Communities - Cables Gone Wild

 

Rental Property - Plus & Minus, Buying A Hotel Unit

 

Aesthetics - Bold Designs Keep Boredom At Bay

 

Agent Commission, The Low Down About Paying Up

 

US Financial Crisis - Clouds The Property Horizon

 

Phuket - The Next Big Property Trend 2007

 

Vietnam, Too Fast Too Soon

 

Pre-plan your purchase, and prevent future pain

 

How we should protect the property cash cow

 

Timeshare, High End Fractional Ownership Matures

 

Budget Hotel Brands Shake Up The Scene

 

Re-Inventing Patong

 

Bali, (property) Supply Surges Ahead

 

Property Developers - Number Crunching Pays Off

 

Phuket, Battle to preserve the beaches

 

Aesthetics - Designing For Success

 

Phuket Luxury Villa Market Update Feb 2009

 

Khao Lak, Back To The Future

   
 

 

   
 
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