In my last column I looked at the emerging luxury property segment in Thailand’s other island resort destination, Koh Samui. As a continuation of that, I will review ongoing demand, issues and forecast trends on the island. Having spoken to a range of developers, agents, investors and purchasers, what follows
typically represents current market sentiment.
We are seeing a weak start to the year and can expect lower levels of demand to persist throughout 2009,
and quite possibly well into 2010. While recent Thai political problems have certainly impacted the property
market, this is seen as a short-term issue. Far more pressing for the Samui market is the difficult sales
climate, which is evident at present. This is mainly due to a decrease in confidence and liquidity among
potential purchasers as a result of tough global financial conditions.
We are seeing a move to moderation, rather than heady optimism, among buyers. There is a gap between
the prices offered by developers and owners and what prospective purchasers are willing to offer. This has
led to developers being open to negotiation and to opportunistic buyers who are hoping to benefit from
short-term market softening.
It is likely that in the long term, prices will recover, but in the current climate, the limited number of
transactions that are being made will happen at a discount. An additional challenge to developers is the
growth of the resale market, as owners affected by the financial downturn are forced to monetize assets.
This will increase competition within the luxury market, as certain resales are being offered at significant
discounts. In addition, in the current climate there is a degree of comfort associated with buying finished
products, which may also impact off-plan sales in an already tight marketplace.
However, the Thai government is offering some support to the local property market, which is timely.
Opportunities exist for local investors to gain a foothold in Samui’s tourist industry, as they will be offered
Thai Board of Investment (BOI) incentives on an automatic basis if they win bids to buy back assets in
Thailand from troubled foreign companies affected by the financial crisis. Furthermore, indications are that
there may be some signs of recovery towards the end of 2009, though as of late these forecasts are being
pushed into next year.
Samui’s tourism market has traditionally been an important source of potential villa purchasers, and as
conditions improve, tourism is expected to strengthen. This, combined with the limited current and
upcoming supply of prime properties, should provide a solid basis for upward momentum in the Samui
When compared with Phuket’s real estate market, Samui’s is still in its infancy. But it is rapidly catching up
in terms of product variety and robust pricing levels. The Samui Estates villa project (adjacent to the Four
Seasons), was the first large-scale project in Samui priced in excess of THB100m. However, the W Retreatand
Conrad¬branded luxury villa projects are also testing pricing levels in the market, as are a variety of
smaller boutique luxury villa developments. With the newness of many of the high-end developments, it
remains to be seen how the market tolerates current asking prices.
However, it needs to be acknowledged that current and upcoming supply in the top end of the Samui property market is very limited, and few prime parcels remain available for future development. As such, it is likely that in the medium term, upper-tier property will remain a small but exclusive segment of the wider Samui property market, adding support to the price premium.
Another change is in the location of new upper-tier projects. The bulk of development in Samui has always clustered on the northern and eastern coasts, which have become increasingly