Thailand’s island resorts have been magnets for property investment in the past decade. Phuket, Krabi and nearby regions are still bustling with new luxury projects and schemes. Kenny Coyle reports
Thailand has long been a haven for retirees and second-homers. Its climate and low-cost of living have attracted expatriates in search of a place to escape the pressures of their work week or to gain maximum value from their pensions.
Thailand’s island resorts of Greater Phuket and Koh Samui have proven popular spots for those looking for luxury property that won’t break the bank. However, this idyllic vista has recently been spoilt by the dark clouds of economic uncertainty and political instability, which have gathered on the horizon. The effects have spilt over into the property market.
Yet, most industry analysts remain confident that these issues will prove to be temporary setbacks and that the islands will re-emerge as a location of choice for luxury home and villa buyers.
Some even see positive elements in the current climate. Property prices have fallen for new buyers and for those investing in new-build projects; construction costs have also declined.
One of the key problems for foreign buyers in Thailand is the lack of access to local mortgages. This means that most buyers must purchase their property in cash outright.
This has, however, had another effect, namely that buyers tend to be well heeled and the mortgage-debt issues that have plagued other property markets recently are rare to non-existent.
PHUKET
Bill Barnet, managing director of C9 Hotelworks in Phuket, says: “Thailand is essentially a cash-and-carry property market. As a general rule, mortgages are not available to buyers with the exception of some developer financing. For Singapore and Hongkong buyers, HSBC has a scheme but there is little take-up and there are strict pre-qualifications. The lack of debt is the sleeping giant in this market; if you make that available, then the property market will grow tenfold.”
This cash-based system also means that house-buying deals progress relatively quickly.
“Speed of transaction is not an issue here. There is a significant mass of resort-grade villas in Phuket, with over 4,000 units and over 5,000 condos and apartments, so registration is fairly straightforward,” says Barnet.
Greater Phuket, which includes Krabi, remains one of the most sought-after locations in Southeast Asia, with its substantial expatriate community, international schools and high level of medical care making it an attractive spot for many Western expats over the past couple of decades. Critical to any plan to buy is the quality of the surrounding infrastructure. Phuket Airport is being expanded and by 2010, should be able to handle 11.5 million passengers a year.
Nonetheless, there are important shifts in Phuket’s property market.
For one thing, the days when the Thai expatriate community was almost exclusively dominated by North Americans and Western Europeans may be coming to a close, with the entrance of wealthy Chinese, Indian, Middle Eastern and Russian buyers, which may reshape the island’s demographics in years to come.
Previous development has also created a land shortage. This has meant that developers are increasingly looking at smaller scale projects, perhaps of a dozen to 20 villas, rather than the larger-scale projects of yesteryear. However, even this has its upside, by guaranteeing a more boutique feel to the properties. It has also meant that developers have looked further afield, not only to the island’s northern and eastern coastlines.
Barnet says: “Phuket is bursting at the seams, so we see just over the bridge in Phang Nga. Richard Li of Pacific Century Premium Developments in Hongkong is developing a large mixed-use project on a golf course there.
“Krabi remains attractive with Amatapura being an up-and-coming development and in Samui, Koh Tao and the outlying islands we are seeing new developments.”
Phuket has also established itself as a major boating destination and with further marina developments planned on the island’s east coast, this will inevitably lead to a renewed increase in interest among the superwealthy.
As hotel companies such as Marriott and Starwood realised years ago, many property buyers seek to combine the privacy of having their own residence with the convenience of using hotel facilities and services. Marriott’s Phuket Beach Club was the first Marriott Vacation Club International complex to be set within the grounds of a JW Marriott Hotel and its first in Asia. Buyers had the option of outright purchase or a time-share option, giving access to the JW Marriott Phuket Resort and Spa’s extensive leisure and dining amenities.
KOH SAMUI
Development on Koh Samui has not been as extensive as Phuket, but this is changing. Bangkok-based Amburaya Hotels and Resorts in association with Dubai’s Nakheel corporation, have joined Starwood to create the W Koh Samui Retreat and Residences.
Managed under Starwood’s W brand, the 75-villa complex will be the first W hotel resort to sell residences rather than condominiums within the hotel.
The 17 residences each include a private pool and have three to five bedrooms, with a price tag of between US$3 million and US$6 million each. The residences offer 1,000 to 2,800sqm of space, all with sea views and some are located on the Koh Samui shoreline itself.
The hotel complex is under construction on 1.09ha of headland on the island’s north coast, 15 minutes’ drive from Koh Samui airport and is due to be completed in 2010.
Amburaya Hotels and Resorts managing director Ashwani Bajaj says: “We think we have hit the right market and chosen the right place. Koh Samui is not a mass-market tourism destination like Phuket. Visitors are either at the budget end or the upscale end of the market.
“The W brand is very refreshing; it breathes new life into the sector. Residents will also be able to make full use of the W brand’s signature Whatever/Whenever (24-hour concierge) service.”
KRABI
The Amatapura Krabi project represents the new trend toward smaller boutique properties, consisting of just 29 pool villas. Fifteen are located on the beach, where there is a 200m-stretch of unobstructed shoreline on the Andaman Sea.
Designed by KTGY Inter-associates, the complex aims to be the most environmental-friendly community in Krabi, with almost zero effluent released into the surrounding environment.
So is now the best time to buy? Barnet says: “There is an old adage, ‘it’s either ten years ago or today’. If you buy on strong demand generators, such as ocean view and good locations, quality development over time, capital appreciation and yields will be good. I think in the current market, the idea is to match buyers’ expectations of discounting with developers who don’t want to. The answer lies in between.
“There is a strong resale market at the moment and cash is king, so it’s a good opportunity to buy now.”
HOME-OWNING RIGHTS
Thai law effectively prohibits foreigners, either individuals or companies that are more than 49 percent owned by non-Thai nationals, from owning land in the country.
Foreign investors who bring at least US$1 million into the country can own one plot of land for their personal use. However, the plot cannot be larger than 1,580sqm and cannot be coastal land.
Foreigners can, however, own buildings and take out 30-year leaseholds that protect the property. Many property companies suggest that to conform with Thai law, buyers should take out a 30-year lease on the land that their property is located on with the right of renewal for two further 30-year periods. The lease can be transferred if the property is subsequently sold.
Buyers should always seek expert legal advice before making any purchase or signing any agreement.
TIPS FROM THE EXPERT
Bill Barnett offers his suggestions for would-be buyers to make the right property choice.
• Choose a strong location. Remember that with all property, it’s location, location, location.
• Look for a good demand generator such as a sea view, established resort market, good neighbours in terms of developments and quality.
• Buy at a reasonable price; buy low, sell high. However, it’s not a get-rich proposition, take a long-term view.
• Get yourself a solid back-up team, legal, accounting and a building inspector. It’s too easy for guys to fall off the plane, fall in love with a resort island and sign on the dotted line.
• Find an experienced developer and quality management – you want these guys to deliver your dream home, so make sure they can do it.
