Laguna Gearing Up In Phuket

[george]

Laguna gearing up in resilient Phuket

Investor interest continues abroad

BANGKOK: -- Clearly underscoring the resilience of the Phuket property market is the move by Laguna Resorts and Hotels Plc to launch a new residential project within 30 days and a successful real estate exhibition staged in Hong Kong by Knight Frank Phuket in early May.

Laguna is preparing to launch a new mini-townhouse condominium project featuring a common swimming pool on site, with sales being pitched in Europe as well as its traditional markets in Singapore and Hong Kong, according to joint managing director James Batt.

Knight Frank Phuket managing director Stephen O'Brien said in a separate interview that other developers on the island had apartment projects on the drawing board at Patong and Kata beaches. As well, another developer is expected to follow Royal Phuket Marina's example and introduce a marina residential project.

However, Mr Batt admitted that these are still not easy times for Phuket property developers and hoteliers. Hotels are quiet, with far fewer Taiwanese, Korean and Japanese tourists that are normally seen in the period after the traditional high season. Asian visitors' nervousness since the tsunami has been notable, though Australians and Europeans are showing less reluctance.

However, Mr Batt is certain that a rebound will come. He also points out that property is not a perishable commodity like a hotel room which, if not rented out, means the owner loses money on it. With property, he said, if one cannot sell today one can sell next year and for this reason there are generally no discounts available.

Mr O'Brien said that Knight Frank's first property exhibition in Hong Kong since the tsunami, held in early May, was successful with 40 people showing up on opening night and another 20 visiting the Knight Frank office in Hong Kong the next day.

``And as a result of all that we have had seven firm reservations and we are still getting reservations, people inquiring about contracts and how to make a deposit and so forth,'' he said.

The sales in Hong Kong were significant as they were for investment, a segment that had been in decline immediately after the tsunami, rather than lifestyle property.

Meanwhile, those specialising in selling Phuket property to foreigners have had to deal with another unsettling development involving the decision by Dulwich College of London to terminate its franchise contract with a boarding school on the island over policy differences.

``I would say about 30-40% of the sales that we made have been Dulwich-influenced,'' Mr O'Brien said. ``In other words, [the international school] certainly hasn't been the reason why people have bought but certainly has been a major consideration.''

Despite the difficulties Phuket faces, Realty World Alliance managing director Visit Kunatharakul confirms that prices have not dropped. ``Phuket is the only province where prices did not drop during the economic crisis of 1997. The maximum discount during the economic downswing was 10%, Phuket recovered a long time ago,'' he said.

Developers at other good destinations in Thailand seem to be attempting to move ahead as Phuket tries to get back on its feet. Mr O'Brien noted that while he was in Hong Kong there was a lot of advertising from Samui property developers who are leveraging direct flights between the two destinations. This is in contrast to Phuket where airlines stopped direct flights to Hong Kong but these are expected to resume very soon.

``So obviously there is quite an aggressive campaign by Samui, Pattaya and Bangkok developers to try and encourage the investment market to go into those different areas. And sure, we expect to lose some business until the airlines make a comeback and that inevitably will happen,'' he said.

Some Krabi property developers are also eyeing the Hong Kong market and Knight Frank Phuket is advising them on what their strategy should be.

However, regionally Bali continues to remain a tough competitor for Phuket and the Indonesian island is now capturing a lot of Singaporean business, Mr O'Brien said.

Looking back one can see that Bali's recovery from the bomb attacks was actually driven by the tourism industry itself with tourist operators and collective bodies across the region holding their travel exhibitions and travel conferences there.

``And I think that shows and demonstrates that a recovery has to be driven and led by the private sector. While the Tourism Authority of Thailand and all the airlines are doing their bit, certainly I think that we need to be more aggressive now in capturing the Mice market and a lot of hotels are chasing that business,'' he said.

While the Phuket market is strongly geared toward foreign buyers, these buyers usually have to find their own financing outside of Thailand.

But Realty World's Mr Visit says the rules are easy enough for foreigners to buy property in Thailand, and banks' reluctance to give foreigners mortgages has nothing to do with the government.

``Banks think it's too risky to lend to foreigners and the situation will continue this way,'' he added.

--Bangkok Post 2005-06-06

[axl]

... With property, he said, if one cannot sell today one can sell next year ...

I wouldn't be so sure... Phuket's infrastructure is far from keeping up with the supply of property and its inflated prices; furthermore tourists and foreigners (the main demanders of property) are held responsible for invironmental problems (see: Phuket Gazette) which might detain future investors...

EDIT: The Laguna Area might be a exception; but then again: the exception proves the rule.

Edited June 6, 2005 by axl