Stories have it that if you had come to Phuket in the 1930s, you would have not recognised it: scattered across the island’s countryside were muddy craters left behind by its lucrative tin-mining industry. Global demand for tin ensured that Phuket for decades had a steady source of income.
But the mines were not to last forever. By the 1980s demand for tin abruptly died, mainly due to the discovery of other areas where the mineral could be easier and cheaper to exploit. The mines closed, and Phuket had to look for an alternative source of income. Fortunately it didn’t need to look so far.
After all, the island is also known for another commodity: miles upon miles of stretches of white sand that meet the turquoise water of the Andaman Sea. All it needed to do was to build hotels and resorts where people can stay.
And build it did. By the late 1980s and early 1990s property developers who wanted to cash in on the island’s booming tourism industry came in hordes. Long stretches of sand along Phuket’s western shores – Patong, Karon and Kata – were heavily developed and promoted. Aside from hotels and resorts, private houses, condos and villas were built. Tourists took notice; many stayed for good.
The island over the last two decades has built up a reputation as Asia’s premier island holiday destination. Its infrastructure has improved leaps and bounds in recent years, said Phuket.net Real Estate’s Kit Fordham. ‘The island now has international standard hospitals, schools, marinas and excellent retail malls.’
It is now perhaps Thailand’s most well-known tourist spot after the capital Bangkok. Its airport is the country’s second busiest, receiving passengers from as far as Moscow and St. Petersburg. An industry closely tied to tourism, Phuket’s real estate is also booming. But this does not mean that everything went smoothly. The Asian Financial Crisis in 1997 restricted growth. Then the Indian Ocean Tsunami in 2004 caused devastating damage. In 2008, a financial downturn took its toll and caused another major blow to a then barely recovering market.
But if there’s something that was learned from the crises, it’s the market’s newfound pragmatism and maturity. According to CBRE Thailand managing director Aliwassa Pathnadabutr, Phuket’s property market before the crisis was dominated by small players, many of whom were less well-funded and, therefore, ill-prepared to deal with financial shocks. ‘When the crisis hit, many of their projects were put on hold.’ Phuket, however, has once again proven its resilience.
Gradually its property market became once again ripe for another phase of positive development, said Pathnadabutr, driven mainly by the arrival of established developers, both local and foreign. ‘There’s a newfound energy characterised by changes in the key players, the products on offer, and the buyers’ profile.’
An observation shared by Phuket.net Real Estate’s Kit Fordham. ‘Although the island’s property market remains challenging, 2012 saw a marked improvement over the previous four years since the start of the financial downturn in 2008.’
The island’s market is driven by a mainly cash-only group of overseas buyers, which sort of cushions the island from major financial shock from outside. And with the continued growth of the island’s tourism industry, as indicated by record-high arrivals at Phuket International Airport, the outlook for 2013 is very positive.
‘With regards to vacation properties you have to keep in mind that the best locations are those that are most attractive to holidaymakers,’ said Fordham. ‘Properties with sea views are always in demand. Another important factor is distance to the beach. ‘If you’re within 5–10 minutes’ walk to the beach it can be a huge advantage.’
The island’s west coast (Patong, Kata-Karon, Kamala, Surin, Bangtao, Layan, and Nai Harn) offers the greatest demand for both sales and rentals. There are plenty of available options, too. However, as Thailand’s ownership laws specifically prohibit any foreigner owning land in the country, the obvious choice is condominiums. Here the island has plenty to offer. Examples include branded properties such as Laguna Phuket’s Lofts at Bang Tao Beach and Mövenpick’s Residence on Karon Beach, or local brands Royal Phuket Marina in Phuket City and The Heights in Kata.
But beach villas operating under a well-known brand are also available on a leasehold basis (usually 30 years with an option to extend for another 30 years). Leading the pack is Banyan Tree with its multimillion double-pool villas within in Laguna Phuket integrated resort. Other major players include Amanpuri, Sheraton, Dusit and Raffles, among others.
Besides a volatile economic climate, Phuket’s biggest battle is in the environmental front. According to Fordham, the island is walking a thin line between preserving its natural environment and at the same meeting its growing infrastructure needs to maintain growth.
‘Infrastructure is being improved to cope with Phuket’s growing population and tourist figures, such as the airport expansion and renovation, but unfortunately environmental issues are not given the same priority,’ said Fordham.
But there have been achievements. One is an initiative between local NGOs and government agencies called SEEK (www.myseek.org), which has done a lot to promote environmental issues. ‘But the government could do a lot more,’ said Fordham.
There is also a recent crackdown on encroachment of national park land around Layan and Naithon. ‘However, this has stalled and we have to wait and see whether the government will follow through on its promises.’ ‘Law enforcement by local authorities to control and manage development is still a major issue. We are still a long way off from real change but in the last couple of years there has been more public debate on these issues, which can only be a good thing.’
Fordham added that periodic crackdowns cause more damage than benefits to the image of the island’s property market. ‘What we need is consistent enforcement of the laws already in place so that everyone knows where they stand.’
A buyer’s guide
To get around ownership restriction, many foreign buyers opted to set up Thai companies solely to buy land in Thailand. This loophole, however, is now being closed. A legal way is to enter into a long-term lease on the land: 30 years initially and include an Option to purchase at an agreed figure (should foreign ownership become legal in the future) or extend the lease for another 30 years (see page 23 for more details).
A foreign buyer must also apply for a permit to build a house on the leased land under his or her own name, to ensure that he or she owns the structure and has a long-term lease on the land on which it sits. As always, make sure to hire a reputable lawyer.
In addition, it is legal for foreigners to own shares in a condominium project, as long as more than half of the development is owned by a Thai entity.
What to buy
1. Sitting on a U-shaped land in Surin Beach (15 kilometres north of Patong) is a three-bedroom, US$825,460 villa that combines Asian architecture with modern conveniences. All bedrooms have en-suite bathrooms. The master bedroom and the dining area have views of the 60-square-metre infinity pool. It has a spacious L-shaped patio that provides ample room for outdoor entertaining, and an open-plan dining area leads to a fully equipped kitchen. The property sits in a small (940 square metres) gated community of only eight villas. The property boasts spacious double parking and 24-hour security (www.phuket.net).
2. Then there’s the US$3.15 million luxury villa in Surin hills for the well-heeled. Meticulously looked after by the original owner, this villa has a functional layout set over four levels. The living areas’ high cathedral ceiling give a feeling of expansive space coupled with panoramic views (courtesy of floor-to-ceiling windows) of the Andaman Sea. Set on a 2,400-square-metre land, the villa features indoor and al fresco living areas, six bedrooms with en-suite bathrooms, twin kitchens, storage areas, and a swimming pool with surrounding terrace space for entertaining and open-air sala. Entrance to the property is through either a private gate or the electronically controlled gates to the covered double car park.
3. The location of these pool villas is ideal both for an investment property and permanent residence. Layan Beach is a mere 3-minute drive, while the Laguna Resort Complex, which boasts an 18-hole golf course, leisure activities, restaurants and boutiques is also nearby. Each of these pool villas has over 300 square metres of usable area, two to four bedrooms (all with en-suite bathrooms), open-plan living and dining areas, private pool and a covered carport. Price starts at US$380,420.
4. Situated on a hillside in the Kata area are 219-square-metre condominium units overlooking the Andaman Sea. Ideal for holiday-makers and expatriates, this property is just five minutes from the beach and very close to many of the area’s dining spots. Each apartment has two bedrooms, spacious living and dining area, fully equipped kitchen, two bathrooms and large terrace with an unobstructed view of the Andaman Sea. Prices start at US$860,414.