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Market Watch - Page 33:

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The Winds Of Change

 

 

 

At long last the year that wouldn't go away is nearly over and the halls of commerce for Phuket property resound with a collective sigh. As we enter the last year of the decade, it feels akin to hitting a reset button on some magical electronic device, and a clean storyboard will suddenly appear.

The 1990s marked the birth of the pool villa resort, after the style of Amanpuri and Banyan Tree. For most of the 2000s, the allure of resort-grade property in a tropical location, with fairly short travel time to the capitals of the region, was irresistible.

Few publicly listed Thai companies - with the exception of Laguna Hotels and Resorts, Land and Houses and later Charn Issara - took part in the developing market. The landscape was marked by small entrepreneurs. It became almost a gold rush atmosphere, involving mostly foreign businessmen or joint venture partnerships. Demand far out-stripped supply.

Capital appreciation grew year on year at well over 20 per cent, and looking back at the most successful enterprises, the initial buyers often made better returns then the developers themselves. With debt unavailable, one of the main methods of raising money was taking land on contract, going to the market with an appealing design and marketing materials, and then gathering presales to fund construction.

It's interesting to note that, in most cases, the formula worked. In my my nine years on Phuket I can come up with fewer then 12 projects that failed and defaulted. However, times changed. The burgeoning market was beset by events including the bird flu, the tsunami, Thaksin, the coup, the foreign business act scare, and ultimately the global financial crisis and the violent political demonstrations, including closure of Suvarnabhumi airport.

Nothing moves in straight lines. What was more the atmosphere of an emerging market has now moved higher in the cycle and matured. Resales and rentals have now edged into the market place in a significant way, displacing off-plan sales,

 

 

and many other Asian destinations such as Bali, Vietnam and Malaysia have targeted the bonanza of holiday and retirement homes.

At the same time, the mid market for apartments and condos saw a swing, with flattening of demand, and a number of local and Bangkok based developers moved into the fray with successful models such as Two Villas, Erawana and Baan Thai Surin Hill.

The early profile of developers is changing because buyers in the current market are often looking to mitigate development risk and are seeking out completed units or developers who are building projects irrespective of sales pace. An ability to obtain bank financing is now a necessity and there appears to be a changing of the guard in the industry.

Despite the shift in developers, Phuket remains predominantly dependant on foreign buyers, which could be viewed as a plus or a minus. Pricing per square metre places Hua Hin and Pattaya in an enviable position, containing speculation by local buyers. This has created good fundamentals. Although the Bangkok market sprang back in the third and fourth quarters with domestic transactions, the relatively small number of these on the island could confound a healthy market mix.

Changes to the Escrow Act, revision of the Condominium Juristic Act and signals from Finance Minister Korn Chatikavanij, who is listening to the Joint Foreign Chambers of Commerce on increasing initial leasehold terms from 30 years to 50, are all positive news for the market. As for the slowdown of the economy, I have personally met three different Thai financial institutions over the past few months looking to get into lucrative end user financing for foreign buyers.

As I fly into Phuket, I am always amazed at how much green space there is, despite the frenzy of building over the past few decades. In many respects it's similar to the island I moved to a number of years ago. But the winds of change are surely sweeping through the island's property industry.

 

 

 

 

   

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

 

Is Phuket Ready For Fractional Ownership?

 

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

   
 

 

   
 
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