Krabi: On the edge of a boom ?  
Home
Property Guide
Market Watch
Mortgages
Tax
Titles
Rentals
Management
Map
Practical Information
FAQ

 

To translate this page
Click a Flag

 

 

Market Watch - Page 32:

Search this site

Is Phuket Ready For Fractional Ownership?

 

 

 

With property transactions in the broader market flat and forecast to remain so into the foreseeable future, one of the emerging trends we are seeing is the conversion of pure residential projects into alternative investment vehicles. Condominium and apartment projects are branding and looking to sell under an ongoing yield or lifestyle strategy. Now developers are introducing fractional (or shared) ownership schemes with lower pricing points to entice buyers off the fence.

Timeshare or vacation ownership has been selling on the island for most of this decade at Laguna Holiday Club, Royal Resort and Marriott Vacation Club. More recent entrants are Absolute, David Lloyd and a handful of other developers operating independently. Thai law is well equipped to deal with these operations. Even omnibus legislation such as the Consumer Protection Act covers relevant conditions such as cooling off periods and complaint administration.

With the downturn in tourism the next new wave of fractional products look to be hotel residences, with the Royal Phuket Yacht Club – now owned by the Purnavarna Group – selling residences at increments of 1/18th share in a unit. The LaTour Signature Group, which recently took over Indochine Villa Santi, operates this way extensively in North America and is eying further expansion of these products.

Fractional ownership in most developed countries can be divided into two distinct categories. In the first, the buyer purchases a portion of a deeded property and receives a title or deed. The transaction is therefore regulated under property law. In the second, the buyer purchases a specific time usage of a property and no title is provided.

Most timeshares fall into the latter category, with regulatory laws falling under consumer and civil administration. With holiday club or points-based systems, which are becoming more popular, you can transfer your usage into other vehicles such as airline tickets, rental cars and cruises.

What is being marketed in Phuket by many as deeded co-ownership falls into a very gray area and is hard to regulate under prevailing property law. In the West most timeshare uses undivided interest, condominium, co-op or trust vehicles as entities. One of the most interesting developments in timeshare recently has been a considerable amount of litigation

 

 

 

 

in the US and Australia. Brokers were found not to be selling property, but rather securities – which most were not licensed to do. Successful suits resulted in a rather serious revamp of structure in those markets, to the detriment of the entire industry.

Providing a clean legal framework for both purchaser and developer remains a challenge in Thailand given the ambiguity of the law for fractional ownership at present. There are international hotel companies such as Ritz Carlton that operate residential clubs. These require developers to actually split mixed-use components, including land titles, and ensure no property that is sold to fractional buyers has any liens or securitization. There is much apprehension when a long-term residential property is attached to a somewhat volatile asset like a hotel. In a downturn if bankruptcy or insolvency takes place then considerable risk is taken by interval purchasers.

Internationally when hotel brands operate fractions, management agreements are scrutinized to determine what guarantees are made if you purchase a fraction in a branded property and then in a few years the operator is changed. Additionally, as properties age, what are the consequences when the asset is no longer able to viably operate as a hotel? How can investors exit what is not traditional real estate?

Unfortunately there are more questions then answers in the current Thai landscape. But with real estate a major industry here we have seen ancillary laws such as the revised Condominium Juristic Act become more sophisticated over the past few years. Most likely, fractionals will move more into the limelight of the Thai
property market over the next few years, with developers needing to see improved cash flows. Lower investment thresholds are possible, thus widening the potential market, and a volume approach can be
taken to revenue generation.

For the most part developers try to do the right thing. But for potential buyers of fractionals it’s important to look closely at all of the aspects of the transaction along with the carrying cost. Consultation with an experienced legal advisor is always recommended. A resale market for fractionals without historicalperformance figures to rely on introduces additional unknowns.

Phuket’s property market is diversifying. This is simply a sign that Phuket is conforming to the greater global development cycle. As for fractionals – they are going to be with us for the long term.

 

 

 

 

   

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

 

Phuket Luxury Villa Market Update Part 1

 

Koh Samui's Luxury Market Emerges

 

The Next Big Thing In Ocean Front Real Estate

 

Predicting The Year Ahead - 2009

 

Phuket For Sale

 

Is Phuket Property Too Expensive

 

The Winds Of Change

 

Koh Samui's Emerging Luxury Market Part 2

 

 

       
 

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