Who Is Buying All These Houses?

[Sir Burr]

There has been non-stop building ever since I first made Phuket my home, but, in the last two, or, three years, the amount of developments has seemed to have increased exponentially.

From Nai Harn to Mai Khao there are developments going up, there doesn't seem to be an obvious increase in resident foreigners, so, who is buying all these houses?

What with all these new places, I believe that the second-hand housing market must have virtually collapsed. Does anyone know of anyone that has sold a previously owned house?

Browsing the estate-agent web-sites, there are still houses up for sale that were on the market two years ago.

[henrytuttle]

It's strange to see housing going up and no one moving in.

I live in Dubai. Here there are hundreds of apartment building. Most were presold before they even started construction. At night, most of the lights are off. It's a little eerie to see a hundred skyscrapers (building about 40 stories +) with only 5 to 10 lights on in each.

But, despite everyone also talking about bubbles bursting, prices keep going up. I'm sure Phuket will be the same.

And should they ever change the laws about foreign property ownership - which they will sooner or later - watch out! I'm sure the pace of construction will go up and people will start moving in in droves.

[petitechevre]

from running around small streets and trying to find a new house... seems like farangs are buying tons of houses in hope of renting them at insane prices.

[flamingtodd]

I agree with Burr.

There is a community on Sai Yuan that was different colors, and not one has been sold. I think they have even repainted them, thinking this was the reason they were not selling.

Went by there yesterday, still not one has sold.

In my opinion, the Med. Style places are crampy and way to close together. I am in the market for a place, but even with all the construction going on, the prices are far beyond the worth. I think it might be Thai's doing the developing to look wealthy to other Thai's. Or maybe they know something I don't. Maybe they are building up because some new law is going to pass.

What is the reason that Phuket doesn't become a SER like Hong Kong or Singapore?

I will wait for that to happen before I can trust my cash to whatever scheme is necessary to buy a nice place nowadays.

This place is really out of control. Amanda and I bought a villa in Goa, no problems. But Phuket?

I will just keep renting from my German Landlord. He is quick on the repairs, and rent is cheap for what I get.

todd

Edited July 4, 2008 by flamingtodd

[Royale]

There has been non-stop building ever since I first made Phuket my home, but, in the last two, or, three years, the amount of developments has seemed to have increased exponentially.

From Nai Harn to Mai Khao there are developments going up, there doesn't seem to be an obvious increase in resident foreigners, so, who is buying all these houses?

What with all these new places, I believe that the second-hand housing market must have virtually collapsed. Does anyone know of anyone that has sold a previously owned house?

Browsing the estate-agent web-sites, there are still houses up for sale that were on the market two years ago.

I ask myself the same questions every day! I've had a house on the market for 2 years and had very few even look round, dropped the price by a 3rd and still can't sell it.I think that unless you have a house with a fantastic sea view or a Condo then you've no chance of selling. The Thai's are buying as it's still easy for them to get mortgages but most of them are looking at properties under 4 million. None of it's surprising really with the ownership laws here.

[khall64au]

There has been non-stop building ever since I first made Phuket my home, but, in the last two, or, three years, the amount of developments has seemed to have increased exponentially.

From Nai Harn to Mai Khao there are developments going up, there doesn't seem to be an obvious increase in resident foreigners, so, who is buying all these houses?

What with all these new places, I believe that the second-hand housing market must have virtually collapsed. Does anyone know of anyone that has sold a previously owned house?

Browsing the estate-agent web-sites, there are still houses up for sale that were on the market two years ago.

Primarily wealthy expats and wealthy citizens from Singapore, Hong Kong, Europe, China and US. And let's not forget Russia as a new player. The property market is complex - and since I write about it I do feel qualified to comment. Due to Thai laws, most investors are looking at high-end investment returns and security eg. seaviews, quality construction and branding credential. The international brands are doing well - five-star living and guaranteed returns. The unmanaged developments on Phuket, mostly surrounded by chaos, will never attract serious investors.

[stevenl]

Went by there yesterday, still not one has sold.

Pass by there quite often, my son lives in a house on the Soi next to the development. Quite often I see a light on in one of the houses, and he also told me one is being lived in.

Even if that is true, the developer can't be very happy with this return.

[steelepulse]

>>There is a community on Sai Yuan that was different colors, and not one has been sold. I think they have even repainted them, thinking this was the reason they were not selling.

Went by there yesterday, still not one has sold.

Was that those funky shaped/ odd looking houses about 700 meters up from the main road ( Vichit ) on Sai Yuan on the right hand side right before the palm resort? 

[smartecosse]

looked at those

they are that close together the roofs overlap

and no garden at all

[Sir Burr]

I've seen that development, the Phuket Gazette ran an article on them.

A greedy Thai developer trying to maximise his profit by cramming as many properties as he can onto the land.

They really haven't a clue as to what foreigners consider a 'desirable' property. Not surprised that he hasn't sold any. A real eye-sore.

[LivinginKata]

I've seen that development, the Phuket Gazette ran an article on them.

A greedy Thai developer trying to maximise his profit by cramming as many properties as he can onto the land.

They really haven't a clue as to what foreigners consider a 'desirable' property. Not surprised that he hasn't sold any. A real eye-sore.

Are you sure that the actual developer has not sold the units ? It is usual that developers sell 'off-plan' before they even start building, and then the first buyers trys to sell 'second market' at a huge profit when the building is completed. These first market buyers are usually Thai who are quite happy to sit waiting for years as the property prices rise year on year at annual % rates much much higher than bank interest. I know some Farangs that have bought many condo units off-plan. They wait until all the units have sold, then offer up their units at 'market' rate and can make 10% in just a couple of months. Once the building is complete then 50% profit can easily be made. IF THEY CAN SELL!! Trouble is that right now too many new builds are starting = speculators will be burned.... good ....

[Samuian]

.... IF THEY CAN SELL!! ....

This makes all the "little" difference, doesn't it? If.... so simple, yet few don't understand or yet, want to know!

Anybody can make 500, a 1000 % in no time...IF....

[LivinLOS]

I have mates who keep repeating the mantra of how much they have made in property here.. Yet not one of them can actually sell any of thier homes !!! I have another mate with a house on the market for 4+ years.. I know many houses that have sat for 3 4 or more years with the sign up.

I pointed out the other day to my GF as we rode along.. 3 HUGE developments within a couple of miles on one road.. Where are all the people going to come from to take up those units.. And now that property in the west is doing what I said it would (and its going to get really ugly over there) people are not chanting 'you can never lose money with real estate' mantra that they did duding the credit boom years.

Economies down, employment down, housing down, inflation up, energy prices up.. all a recipie for less holiday makers, early retires, and property buyers..

Sure Thais may hold the line on thier prices for a while (but I doubt it in truth, quiet sales happen that no one boasts about) but the fact is if inflation rages 20% for a couple of years the real value of the property has halved even with maintaining nominal values. Hence I just secured 3 years rental on a pool home and can sit it out.

As to the real prices of land.. I know of so many actually completed land deals that happen at 1/3rd to 1/2 of what the land is 'selling for' in claimed terms.. 3.5 rai of 270 degree panoramic seaview, electric, concrete road, king of the hill plot.. In agents windows for 12 - 15 per rai for the last 3 years whole lot just sold for 10m !!! 4 rai of Patong seaview for 10m (next door to this exact sale a woman quoted my GF 120m for 7 rai of non seaview worse land).. Dont get sucked into the claims or what fresh off the plane peeps pay.

[LivinginKata]

Sure Thais may hold the line on thier prices for a while (but I doubt it in truth, quiet sales happen that no one boasts about) but the fact is if inflation rages 20% for a couple of years the real value of the property has halved even with maintaining nominal values. Hence I just secured 3 years rental on a pool home and can sit it out.

Completely agree with you. I remember about 8 years ago an article written in the Gazette by William of Phuket Land along the lines that properties with high asking prices took years to sell (even back then !) and only sold when property appreciation had make the original asking price realistic. That was when inflation was much lower and annual property appreciation was something like 20%. Now that it looks like inflation is out of control (government ineffectual), predicted tourist numbers down, worries about government, then it going to be tough to sell anything.

I've always said that renting is relatively cheap compared with the (theoretical) market sales value of the rental home, and given the problems with foreign land ownership. Plus you can easily move on if you don't like the neighbour hood (noisy neighbours, noisy dogs, noisy building works). The main value in buying your home used to be (1) saving in rent, & (2) property appreciation. But it's looking like property appreciation is a thing of the past for mid range apartments (4 -8 million) given the huge boom in large numbers of apartmenst building coming available to the first market.

[Sir Burr]

I bought a piece of dirt and built a house on it (I hate renting, putting my money in other peoples pocket), but, I plan to live in it.

As I'm a long term resident and will continue to be one, the property market doesn't affect me. Whether it goes through the floor, or, hits the sky, I don't intend to sell.

I still don't understand the buy to let market. I've worked out that the returns are only 4% to 6%. Hardly seems worth it.

Pattaya actually has cheaper comparable properties, yet, higher rent yields. Something that's always puzzled me.

[LivinginKata]

I still don't understand the buy to let market. I've worked out that the returns are only 4% to 6%. Hardly seems worth it.

Pattaya actually has cheaper comparable properties, yet, higher rent yields. Something that's always puzzled me.

Yes, you are correct, yields on market value of the rental property can be low, especially for anyone buying at today's prices. We are fortunate to have bought land and built years ago. We cut out all the middle men by doing-it-all ourselves, thus saving at least 30% on the project cost. The rule of thumb is a full return on the original investemt in 8 years = about a 12% per annum return. We can easily do that given our DIY plan, but the purist accountant will say it's more like 4 - 6% if calculate on current market value of our properties.

New investors buying second market have to charge huge monthly rent to even make 6% return on investment. For example the 2 floor units behind our Kata building were selling off-plan for 8.6 million baht 3 years ago. Now they are complet and up for sale at 12.9 million, and rent out for 86,000 baht/month on one year contract. Naturally they only get the odd monthly holiday rentals, most are empty all year round, and no-one is buying. We can offer up a similar apartment for a third of that rental price and maintain our 12% target on our original investment (but not basd on current market price).

Whether buy for own use or for rental income, a very long term view should be taken. Those hoping for the fast profit are now going to have a difficult time finding buyers.

[logbags]

There is a certain type of person who is trying to ramp up prices and sell Phuket as a milionaires playground while making heaps off over inflated villa prices. Many of these up-market projects come with hefty monthly fees for gardening, pool cleaning and even IT assistance for internet etc.

So you pay 50 million for a villa and then need at least another 25,000 baht a month just for the primary outgoings. The people who sell the project make money forever and I was told this actually started in Scandanavia in the 1950's and people are still making money from it.

If you banked your 50 million off-shore, your interest would pay for a very nice rental without all the headaches of owning your own place. I have a relative who works in the land department and he hears about reposessions and is often asked by the banks if he knows anybody who wants to buy the property by paying out what is left on the loan. My niece got a 3 storey shophouse in Phuket for only 1 million baht after the owner was evicted by the bank.

The properties that I know of are being sold to really cashed up people who don't care anyway but how many of them will want to stay here forever? They want 85 million for a couple of places on the hill over Surin, shit that is close to 3 million US for what amounts to a large apartment, you get sod all land and cannot own it. Sound investment?

If you think this is also not going to cause social problems you are dreaming, what with the locals demoted to serfdom in their own country? I lay the blame at the feet of the developers, most just try to pack as many units as they can on one piece of land and ramp the price as hard as they think they can get away with.

My nephew said the farang developers are worse than the Thais by far and from what I've seen he is correct. I mean 1 million dollars US is about 33 million baht. In some places they want that for a fully attached apartment. The bubble will have to burst sooner rather than later and hopefully this idea of only attracting rich people to Phuket goes with these crazy villa prices.

[LivinLOS]

I've always said that renting is relatively cheap compared with the (theoretical) market sales value of the rental home, and given the problems with foreign land ownership. Plus you can easily move on if you don't like the neighbour hood (noisy neighbours, noisy dogs, noisy building works). The main value in buying your home used to be (1) saving in rent, & (2) property appreciation. But it's looking like property appreciation is a thing of the past for mid range apartments (4 -8 million) given the huge boom in large numbers of apartmenst building coming available to the first market.

My last property was 'selling' with a claimed market value of 25m.. I rented it for 70k baht per month and they had to do huge amounts of maintenance (teams of workmen constantly keeping it in tip top shape).. The rental return was <3%.. I also shared the villa with another couple (it was 500 sqm and 5 beds, plus it devided into two self contained levels) so I rented a 25m baht place for 40 something thousand a month !!..

But what about the capital appreciation return ?? Well some may remember I was the tennant of the Villa thats now hanging off the hillside teetering above Nanai Rd !! The farang is now mired in a never ending court case and has basically lost the lot !! Thats not only my old place but the one up behind to also !! Think 50m plus down the tubes !!!

I struggled to find another home that I liked, I have just agreed on a 3 year deal for a 15m (claimed !!! I wouldnt pay 8 for it) home at 45 a month.. Again 3% returns.

At the same time I have for the last couple of years been ok at market picking and have made 30% per annum on my investments.. So basically one year of not buying, has generated 10 years rent.. 3 years of renting has generated the entire house costs !!

Edited July 7, 2008 by LivinLOS

[LivinLOS]

I bought a piece of dirt and built a house on it (I hate renting, putting my money in other peoples pocket), but, I plan to live in it.

As I'm a long term resident and will continue to be one, the property market doesn't affect me. Whether it goes through the floor, or, hits the sky, I don't intend to sell.

I too would like to do the 'my home is my castle' angle.. But I dont know if I am as fully committed as you (I have decided 3 more years and I will then know, if I am still here then it will be nearly a decade and I should quit worrying).. I have to stop looking at it as a asset / cost thing and look at it simply as 'where I will live'..

Plus I would love to design and build exactly as I want.. I am a Home Theater nut so have always wanted to do a dedicated room, red velvet and old school cinema style, simple things that would make a home perfect and can only be done when you build your own, nice sized rooms (not too many of them) a good covered outdoor living space for rainy season protection. Just the stuff the way you want it.

[Sir Burr]

I too would like to do the 'my home is my castle' angle.. But I dont know if I am as fully committed as you (I have decided 3 more years and I will then know, if I am still here then it will be nearly a decade and I should quit worrying).. I have to stop looking at it as a asset / cost thing and look at it simply as 'where I will live'..

Don't worry, it took me fourteen years of living here before I committed.

Best thing I ever did was to design and build my own house.

[LivinginKata]

My last property was 'selling' with a claimed market value of 25m.. I rented it for 70k baht per month and they had to do huge amounts of maintenance (teams of workmen constantly keeping it in tip top shape).. The rental return was <3%.. I also shared the villa with another couple (it was 500 sqm and 5 beds, plus it devided into two self contained levels) so I rented a 25m baht place for 40 something thousand a month !!..

There is a considerable difference in return for a private Villa and commercial rental apartments. Generally speaking villa are built for private use or re-sale for profit. Often the owner rents out while waiting for a buyer or until the owner retires full time. In this care the owner can only expect an economic rental rate, which often has no bearing on the capital cost. The '8 year return' I mentioned only applies to an apartment building developed solely for a rental business.

We looked at buying a nice modest 2 bedroom bungalow in Chalong for the purpose of renting. But when I checked out the rental rates in the area versus the purchase/on costs/appreciation, then we cancelled that idea. More return to be made in an offshore foreign currency account, with no work or hassles.

Wish I could get 30% return on my money !!!

[Super Hans]

I've always said that renting is relatively cheap compared with the (theoretical) market sales value of the rental home, and given the problems with foreign land ownership. Plus you can easily move on if you don't like the neighbour hood (noisy neighbours, noisy dogs, noisy building works). The main value in buying your home used to be (1) saving in rent, & (2) property appreciation. But it's looking like property appreciation is a thing of the past for mid range apartments (4 -8 million) given the huge boom in large numbers of apartmenst building coming available to the first market.

But what about the capital appreciation return ?? Well some may remember I was the tennant of the Villa thats now hanging off the hillside teetering above Nanai Rd !! The farang is now mired in a never ending court case and has basically lost the lot !! Thats not only my old place but the one up behind to also !! Think 50m plus down the tubes !!!

I could never work out where that actually was - I thought it was up past Sun Hill, Beverley Hills type area. I lived up there for a few months, but could not see any visible signs of the landslide. Am I blind, or am I thinking of the wrong place?

[LivinginKata]

I could never work out where that actually was - I thought it was up past Sun Hill, Beverley Hills type area. I lived up there for a few months, but could not see any visible signs of the landslide. Am I blind, or am I thinking of the wrong place?

There were few visible signs of the landside to be seen when driving up the road to Beverly Hills and above. The damage could only be seen from the road up right of 7-11 to 50 year road.

[steelepulse]

About 1.5 years ago my wife bought a house in a development just past the heroines monument on the way to the airport.  The house is now completed, and we've got it rented out. The rent covers the mortgage and now there are maybe 5 houses left out of 200 unsold, while the price from the developer has increased 40%, so there are some decent deals out there if you look around.  So I guess I'm one of those buying, but only when the numbers make sense.

[LivinginKata]

About 1.5 years ago my wife bought a house in a development just past the heroines monument on the way to the airport. The house is now completed, and we've got it rented out. The rent covers the mortgage and now there are maybe 5 houses left out of 200 unsold, while the price from the developer has increased 40%, so there are some decent deals out there if you look around. So I guess I'm one of those buying, but only when the numbers make sense.

Yes, you are correct. BUT there is a big difference between private buyers looking to the longer term and the property speculators out to make the big/fast profit in a few months. 40% over 1.5 years is not enough for them. That's where all the 'off plan' buyers are coming from (to answer the original OP).

[steelepulse]

Yes, you are correct. BUT there is a big difference between private buyers looking to the longer term and the property speculators out to make the big/fast profit in a few months. 40% over 1.5 years is not enough for them. That's where all the 'off plan' buyers are coming from (to answer the original OP).

Pop pop, poof poof, is that the sound of bubbles bursting I hear on speculators who think they can throw something up and instantly double their money?  Maybe 5 years ago, but I don't see how now in this particular market.

[tamsin]

Another angle on the 'I've had my house up for four years and it still hasn't sold' crowd is that maybe it hasn't sold because no one likes it. I've met no end of farang who turn into architects as soon as they hit the tarmac. 'Oh, took me two whole weeks to design that'. Mmm. That long eh? Then there're the ones who've picked out a design, hand over a load of dosh to the builder and clear off for a few months, not wanting to 'deal with the locals', and come back to find the stairway up the middle of the sitting room. No through doors. Windows in the wrong place. And then complain that the builders made a pigs ear out of it.

In the UK and most of Europe, the housing is pretty much standard for the area. I don't know what comes over people when they come here and turn into a wannabe architect without the benefit of the seven years training and experience. I suppose it's because they can. There's some godawful design here.

[LivinLOS]

Another angle on the 'I've had my house up for four years and it still hasn't sold' crowd is that maybe it hasn't sold because no one likes it. I've met no end of farang who turn into architects as soon as they hit the tarmac. 'Oh, took me two whole weeks to design that'. Mmm. That long eh? Then there're the ones who've picked out a design, hand over a load of dosh to the builder and clear off for a few months, not wanting to 'deal with the locals', and come back to find the stairway up the middle of the sitting room. No through doors. Windows in the wrong place. And then complain that the builders made a pigs ear out of it.

In the UK and most of Europe, the housing is pretty much standard for the area. I don't know what comes over people when they come here and turn into a wannabe architect without the benefit of the seven years training and experience. I suppose it's because they can. There's some godawful design here.

Nope, I can say that the few I know of are both priced in line with the market, in ok locations, and an alright layout and build quality.. It seems to me the resale market is just really really slow.. New build for far more sells, off plan sells, but for some reason the resale is slow.

[Sir Burr]

^

Very true with regard to resale versus new builds.

I have noticed that resale houses on popular gated estates like Anuphas Golfville and to a lesser extent, Land and House, sell far quicker than a single house built on a plot of land on it's own.

[LivinginKata]

I have noticed that resale houses on popular gated estates like Anuphas Golfville and to a lesser extent, Land and House, sell far quicker than a single house built on a plot of land on it's own.

Even Land & House resales have slowed down.