Steady Progress Seen In Phuket Property

[george]

Steady progress seen in Phuket property

`Platinum market' still finds buyers

BANGKOK: -- Despite the lingering effects of the tsunami there are still many property projects at various stages development in Phuket while foreign interest continues to remain strong, according to David Simister, the chairman of CB Richard Ellis in Thailand.

Property is going to continue selling in Phuket with a recent transaction being the takeover of a development in Kamala beach's ``millionaires' row'' by a Hong Kong-based businessman. The property changed hanged hands at a reported 10 million baht a rai which is a new high for a project of its size, Mr Simister said.

``The commitment to move upmarket with the project has already brought a response from buyers,'' he said.

There are number of developers undertaking small projects in the form of a club or syndicate type of investment, in which a group of friends builds the property, in some cases having done so because the market did not provide what they wanted. Having decided to do it themselves they end up buying a plot of land that is surplus to their needs, which they further develop for sale, Mr Simister pointed out.

``There have been two Hong Kong-based original home buyers who have now expanded into buying projects.''

Knight Frank Phuket managing director Stephen O'Brien said separately that the tsunami only slowed property growth by 31%, against the agency's original estimates back in January of around 60%.

``Today we sold the last of the Surin Heights Villas at no discount to an English couple who wanted a quality sea-view property for their retirement next year. ... Projects like Surin Heights, L'Orchide{AAC}e, Villa Santi and Bel Air Panwa have all recorded strong sales, continuous walk-ins and interest,'' he said.

In 2004 there were just 2,833 villas and apartments in the Phuket market of which 41% had been sold. Today there are 3,457 villas and apartments in the market of which 47% have been sold, Knight Frank Phuket research shows.

``The majority of the new supply entering the market is below the 20-million-baht pricing. At this pricing and with most of the product being of high quality, it allows the `mom and dad' investors into the market,'' Mr O'Brien said, adding there were no villas on the west coast under 25 million baht with sea views.

As the pie chart shows, there is a lot of supply in the market under 30 million baht, while the luxury end of the market only accounts for 8% of the existing supply.

``Much of the present takeup rate is between the 15-million and 30-million baht pricing category,'' he said.

Mr O'Brien anticipates that in the next two years there will be very limited supply of ultra-deluxe properties entering the market. ``Our estimates are that a further 162 to 188 villas of the `platinum' level will enter the market. Furthermore, we estimate that demand for product of this type will increase.''

Knight Frank Phuket is concerned about the amount of new apartments entering the market. In August 2004, the apartment market represented just 12% of the total supply, but now less than 12 months later, it is close of 26%.

``We estimate that as many as 450 apartments will enter the market in the next 14-16 months. Sea-view apartments always command a price premium _ about US$850 a square metre,'' Mr O'Brien said.

CB Richard Ellis's Mr Simister said the recent oil price hikes had not dented the interest of foreigners in buying into Thailand and Vietnam. There is particularly brisk interest from Singapore property developers in these markets.

``In the last few months I even had clients in Hong Kong deliberately seek me out because they think Southeast Asia is set to go through a serious rise,'' he said. ``They see globally a lack of growth in Europe and America and they believe that Southeast Asia is a good candidate for stable growth.''

The interest in Vietnam is because it is coming up from a low base with a new domestic affordability, partly as a result of money coming back into Vietnam.

Recent changes in Vietnam mean that foreigners can buy land freehold but once they develop property on it, sale of units to foreigners will be on 50-year lease basis, but to Vietnamese it is a perpetual interest in the strata title, Mr Simister said.

He suggested that Thailand streamline the process for foreign property acquisition by opening up designated areas, maybe resort areas, and take this opportunity to make foreign buyers more regulated in terms of paying taxes.

``It would be interesting to see if Thailand did open up a resort area as a test case what the effects would be,'' he said. ``It might be a beneficial experiment to may be look at an area, perhaps not the most popular areas, may be one that could do with some stimulation, and see whether you could create a market by offering freehold property.''

The heads of both real estate agencies also expressed concern about the amount of misreporting around the sixth-month anniversary of the tsunami.

``Our recovery relies so much on how the international media portray Phuket and the effort we have focused on the aftermath. The recent stories published about `Phuket going broke' are unfounded and are only designed to hype up a sombre situation,'' Mr O'Brien said.

Mr Simister noted reports that the average occupancy of hotel rooms in Phuket was around 20% but at this time of the year, given the amount of rain, average occupancy is traditionally only 30%.

``So yes, it's down but the implication is that it's down to 20% from 100% _ that's not really the right way of looking at it,'' he said.

--Bangkok Post 2005-07-11