US Woes Cloud Property Horizon  
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Market Watch - Page 18:

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US Financial Crisis Cloud the Property Horizon.

 

 

 

During a recent trip to the US, I spoke with several players in the domestic property and tourism industry. The reality of the current US market is a stark reminder of how quickly tides can turn.

According to analysts, as much as 60% of investment in second homes and vacation properties bought from 2006 is now in negative equity. The market value of that new holiday house you bought is now lower than when you invested in it. While these remain paper losses until such time as a property is sold, it's a strong indicator of a recession. Retail brokers are reporting that transactions involving such properties are now flat with no expectation of uplift in the near future.

Turning to world financial markets, petrol futures trading for 2016 is now in excess of US$160 a barrel, with today's prices now over US$130.The significance of this is that long-term futures are now higher than the current price of the commodity. Petrol prices are affecting airlines, with direct flights to Los Angeles and New York by Thai Airways and Singapore Airlines now rescheduled due to higher fuel consumption for the long-range Airbus A340.On the supply side, levels of fuel production have been underestimated by the production giants and growth in emerging economic tigers - Russia, Brazil, India, China - is not forecast. Everything points to oil prices approaching US$200 a barrel in the not too distant future.

As we move through the second quarter of 2008, the fate of the US dollar remains uncertain. While the upcoming presidential election will create a change in US international policy, effects from the disastrous "Bushonomics" era will take several years to reverse.Historically, there are some benchmarks, with parallels between the current sub-prime debacle and previous savings-andloans crises during the Reagan era. It's going to be a long and arduous journey for the world's leading economy; uncertainy continues to grip most investors' minds.In Thailand, the knock-on effect for fuel and commodities, such as rice and seafood, is seeing prices rise at hyperinflationary levels.

Labor costs continue to skyrocket as a result. For the man on the street this equals a rapidly diminishing paycheck, barely keeping ahead of the cost of living.

The Samak-led government was quick off

 

 

 

 

the mark with rapid economic reform, which was welcomed by overseas investors, but the current mud slinging and uncertaintv over nolitical factions is causing concerns.

Another event having a large-scale impact is the recent earthquake in China's Sichuan province, which will require enormous rebuilding in the area, hence the region's steel prices are soarmg.

This column is supposed to be about property. While it is important to give thought to key economic indicators and look at the bigger picture, you may be wondering how all this affects Phuket.

While I was in the US, I met a number of institutional investors who are looking to Asia as a ray of hope. These are firms that continue to have liquidity and need to invest money in highyielding markets.

There has been a shift and redeployment of resources by overseas firms snecializing in leisure and mixed-use projects. They see potintial growth in the property markets of Vietnam, China and Thailand. From afar, Phuket is perceived as a marketable brand with a considerable upside while capturing significant market share in the Asia-Pacific leisure-property sector.

Looking at recorded property transactions, the numbers don't quite gel with the consensus of a total market slowdown. However, oversaturation of the market along with corresponding incremental transactions and a growing resale market are cause for disparity.

While the overall sales volume is there, the number of projects is rising. Most long-term investors are on the lookout for when a market peaks, which may be about to happen in Phuket.

One key indicator is when initial investors start to cash out of the market. Analyzing Land Department transactions shows that this is happening with many medium to higher-end properties.

The good news is that the people selling up in Phuket are reinvesting in more-expensive properties on the island. Market sentiment is important. Investors in Phuket continue to act with confidence without knee-jerk reactions to troubles elsewhere in the world.

 

 

 

 

 
   

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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Koh Samui's Emerging Luxury Market Part 2

 

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Archived Articles: 2007 - 2008

 

Krabi - On The Edge Of A Boom

 

Khao Lak, Back To The Future

 

Rental Income - Investment Rent And Raves

 

US Financial Crisis - Living The Sub-Prime Life

 

Hotel Branded Realestate, Battle Of The Brands

 

Aesthetics - Out With The New, In With The Old

 

Rental Property - Plus & Minus, Buying A Hotel Unit

 

Local Communities - Cables Gone Wild

 

Agent Commission, The Low Down About Paying Up

 

Aesthetics - Bold Designs Keep Boredom At Bay

 

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

 

Low Season - Cyclical Cynics

   
 

 

   
 
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