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Market Watch - Page 25:

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Koh Samui's Luxury Market Emerges.




The island of Samui is rapidly becoming one of the region's most popular options for property investment. In my next two columns, I am going to look at Thailand's other "significant resort island".

The past decade has brought major changes to Samui, where Thai and international investors have funded accelerated development, building high-end residential products and upscale resorts that have transformed the face of the island.

Difficult global conditions worldwide have resulted in a challenging sales environment in Samui. As a result, it is probable that some short-term effects will be evident in terms of slower development progress, reductions in the number of new product lunches as well as a weakening in property transactions and pricing.

However, it needs to be acknowledged that current and upcoming supply at the top-end of the Samui property market is limited and few prime parcels remain for future development - factors that will continue to bolster demand in coming years among potential real estate purchasers.

For most developers and purchasers, there is always a keen interest in identifying new and emerging areas of development. Based on interviews with local developers and industry resources, these look to be centered into three key areas.

First on the lisit is Taling Ngam. While developments on Samui have traditionally been clustered along the northern and eastern shores, the lack of remaining prime sites has resulted in a shift to the west of the island.

Until recently, the Taling Ngam area was a somewhat overlooked part of the island, but ironically it is the site of the first luxury resort on the island, the Baan Taling Ngam Resort. Formerly Le Royal Meridien Baan Taling Ngam, the 70-room resort with its 14 luxury villas was successfully sold years ago. Projects in this area now include Magic Beach, the small Headlands villa development, as well as the upcoming Vana Belle Samui Resort and Spa, to be managed by Starwood Luxury Collection.

The second area of interest is in south Samui, the southwestern corner of which has been slow to develop due to its distance from tourist areas and the airport. However, this area has gathered momentum in recent years with several high-end projects, some underway and others rumored to be in the pipeline.

The availability of good-sized parcels, striking elevation and the unspoilt nature of this area has attracted several high-end projects. As a result, the Phang Ka Bay area and neighboring Thong Krut are expected to become highly exclusive enclaves. One of the first luxury villa products in this area was the striking Naissance
Villas. Future projects include the Conrad Koh Samui and the Park Hyatt Koh Samui, among other luxury developments rumored to be coming.

The third area is not on Samui itself, but on nearby Koh Phangan. As Samui develops apace and land prices rise




further, attention is focusing on Koh Phangan, which remains a relative bargain by comparison.

At present, development activity on the island is limited and small-scale, but sources indicate that prime sites are in demand and that developers are actively seeking out potential locations. The island is an interesting contrast to Samui. Lightly populated and less developed, it has and eco-friendly mindset that may act to check the scale and quality of developments in years to come. Current developments are clustered around areas such as Thong Nai Pan and are at the lower end of the pricing spectrum. However, we still expect to see some major changes to the island's property market.

A critical mass of supply in the luxury segment on Samui is a relatively recent phenomenon, following a small number of branded and high-end boutique developments released in recent years. The upper end of the market comprises a relatively small percentage overall in Samui, currently dominated by low to midrange residential products. Looking ahead, it is evident that the luxury villa pipeline is very limited over the forthcoming 12 to 24 months. This is due is part to global financial pressures as well as local factors, namely a limited supply of prime development sites. A major issue that will impact on the development of the Samui luxury pipeline is tight credit conditions. This is impacting on both buyers and developers and resulting in a slowdown in transactions and development

Local sources have indicated that certain developers are under cash pressure, and in some cases buyers have backed away from planned purchases. This may result in particular developments being shelved or the land sold to other investors.

Furthermore, buyers are aware of the increased risk of buying off-plan and may lean towards finished products, further squeezing developer cash flow.

When combined with a reduced number of purchasers, the net result of these factors is likely to be a backlog of existing inventory. As such, new launches will be limited until existing products are absorbed by the market. These issues are compounded by the scarcity of suitable land for development on Samui. The rarity of prime beach front and seaview property, as well as robust pricing levels, could also be a contributing factor to the slowdown in upcoming supply, as barriers to entry become high as a result.

The outcome has been a shift to new areas of Samui, such as Taling Ngam and Phang Ka. On a more positive note, inflationary pressures on construction costs are easing. Energy costs have decreased and the price of construction materials has returned to more stable pricing levels, This will provide a boost to projects currently under development, providing some welcome relief to cash-squeezed developers.

My next column will focus on demand and emerging trends in this key competitor to the Phuket property market.






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.

Articles: 2009

Phuket Luxury Villa Market Update Feb 2009


The Next Big Thing In Ocean Front Real Estate


Predicting The Year Ahead - 2009


Phuket For Sale


Is Phuket Property Too Expensive


Is Phuket Ready For Fractional Ownership?


Koh Samui's Emerging Luxury Market Part 2


The Winds Of Change


Phuket Luxury Villa Market Update Part 1




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


US Financial Crisis - Clouds The Property Horizon


Pre-plan your purchase, and prevent future pain


Vietnam, Too Fast Too Soon


Timeshare, High End Fractional Ownership Matures


How we should protect the property cash cow


Re-Inventing Patong


Budget Hotel Brands Shake Up The Scene


Property Developers - Number Crunching Pays Off


Bali, (property) Supply Surges Ahead


Aesthetics - Designing For Success


Phuket, Battle to preserve the beaches


Low Season - Cyclical Cynics



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