Vietnam: Too Fast, Too Soon  
Home
Property Guide
Market Watch
Mortgage Finance
Tax
Titles
Rentals
Management
Map
Practical Information
FAQ

 

To translate this page
Click a Flag

 

 

Market Watch - Page 26:

Search this site

Predicting The Year Ahead - 2009.

 

 

 

As a boy growing up, I remember being driven though the suburbs of many American towns and cities, particularly the outskirts, down by the railroad tracks. I would occasionally spot a depression-era wooden house, its paint peeling, with barren patches of grass and a hypnotic neon sign with the words "Psychic Readings - Know Your Future" illuminating the starless night..

I never did make it into one of those shady establishments, right out of a scene from The Last Picture Show, but, perhaps, if I had, I might have gleaned an inkling of what was to come in 'Black October' in the year 2008. Looking back just 12 short months, oil was being touted to hit over US $200 dollars a barrel, Hilary Clinton was pegged as the next US president and Thai politics was in turmoil.

Well, at least we can depend on one thing remaining a constant. Now, as I write, with the price of oil hovering around US$37 a barrel, Barack Obama's arrival in the Oval Office anticipated with much the same fervor as the second coming, and the Thai democratic process continuing its roller coaster ride, it is clear there have been some dramatic changes in the lay of the land over the past year.

As we head into the New Year, the obvious question remains - what happens next?

Sadly, I am no descendant of Nostradamus, and given my larger-than-average frame, I'd scarcely fit down Alice's rabbit hole. That notwithstanding, there are clear signs emerging of what will come to pass in the coming 12 months. We are, without doubt, heading into a time of turbulence and crisis, the likes of which most of us will never have experienced. Its effect will be felt throughout the world, across region and right here, by you and me. It will get worse before it gets better, with predictions of eventual recovery seemingly deferred with each dire installment of financial news.

Staring into my cafe latte, a sorry substitute, I admit, for a crystal ball, I do foresee some fundamental changes affecting the property market here in Phuket. First off, there is the issue of supply and demand. The segment incorporating upscale 4 - 5 bedroom villas on the west and east coast - be they oceanfront or significant ocean view - will most likely continue to trade at a premium.

Given the substantial entry barriers for developments and the limited inventory of new and re-sale units, the key offerings in the first half of 2009 are the Amalfi and the new Banyan Tree Grand Residences, which are now providing a non-rental pool option. The top end of the market looks set to retain its luster. This, as you are about to see, however, is the exception to the rule.

 

 

The middle and lower segments are experiencing a substantial oversupply of existing product.

With re-sales gathering pace, new projects are starting to show signs of a serious slowdown. These segments are looking vulnerable to a price re-aligment, bridging the current gap between prices being offered by owners and developers and what prospective purchasers are willing to pay.

The current lack of parity has led, in the past few months, to a number of existing projects with unsold inventory offering discounts in the region of 20-30%. The 'vulture' buyers have begun to circle, expecting large write-downs over the coming six months. It needs to be acknowledged, however, that these buyers are speculators and are not indicative of the larger marketplace. What is expected is that retail pricing will hold, but substantial discounts will be absorbed by those wishing to transact in the current maelstrom.

While property values will not, as a whole, decline, the market will plateau for an extended period. Moving forward, we will see only limited sales volume, in keeping with current global trends. An absence of debt in the marketplace is both a blessing and a curse. With the unavailability of financing to foreigners, who dominate the market, there is little existing leveraging. In an extended crisis, bank foreclosures in markets with significant domestic content, such as Bangkok, will come into play and over the longer term, drive market values down.

Here in Phuket property remains basically a cash trade, so while there is no danger of large scale property devaluation, new foreign buyers coming into the market cannot mitigate risk and get financing for new sales, which, in turn, severely limits short- to medium-term growth potential. Many cash-rich regional and Asian investors are now looking to markets such as North America, Australia/New Zealand and even Europe to capitalize using debt leveraging.

As we look further into the future, an extended downturn will correct any supply-and-demand inequities and new launches will be limited until the existing supply can be absorbed into the market. This will create a good platform for longer term upward momentum. Risk profiles have shifted, with existing product outtrading off-plan in order to limit perceived development risk. For 2009, the general consensus is that it is going to be a challenging marketplace for property, so it's best to buckle up and hopefully steer clear of those potholes on our journey into the future.

 

 

 

 
   

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

 

Koh Samui's Luxury Market Emerges

 

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

   
 

 

   
 
About | Contact Us |Resources | Glossary | Privacy & Disclaimer | Site Map | Exchange URL
Phuket Property Watch
Phuket Property Sales Co., Ltd. Inc. No: 0837354708532
393/2 Moo 1 Srisoonthron Rd, Cherngtalay Phuket 83110 Thailand
Mobile: +66 87 0500010 Tel: +66 76 270752