Bangkok--2 Apr--CB Richard Ellis’
According to the latest issue of CB Richard Ellis’ Phuket Property Report, the fourth quarter of 2008 marked a turning point for Phuket’s property market in terms of price appreciation and take-up, as the forward momentum of the past five years came to a halt due to the global recession. This has resulted in a significant drop in transactions and project launches, while project cancellations have increased considerably.
“In many ways, the Phuket property market is a foreign-driven market located on a Thai island,” states Mr. David Simister, Chairman of CB Richard Ellis Thailand. “The bulk of visitors, hotels guests and property buyers are all foreigners.”
“While the slowdown, exacerbated by the forced closures of the airports, became apparent in December, when the numbers of bookings, tourists and traditional buyers of Phuket property all declined sharply, we do not expect the Phuket market to follow Spain or Florida into a headlong crash, as there are fundamental strengths to Phuket which differentiate it from other global resort markets.”
Among these fundamental differences is the fact that most completed projects in Phuket have sold out almost all of their units, leaving limited supply. The latest issue of the Phuket Property Report, an in-depth quarterly analysis of the island’s property sector that the company markets to those interested in resort development in Phuket, Thailand and the region, shows that, of a total of almost 3,000 villa units in completed projects, 89% have been sold out. Figures for the condominium sector are similar, where 92% of just over 2,000 units in completed projects have been sold out.
Additionally, Mr. Simister argues that Phuket occupies a unique position among South-east Asian resort markets as it is the premiere resort destination in the region. Also, the expected growth in supply will be curtailed by the recent project delays and cancellations, which should prove to be positive for the island in the long run.
“Our earlier estimates called for as many as 1,700 condominium units to be completed in 2009, but we believe a number of projects will be delayed due to slower take-up rates. Similarly, in the villa market, we have identified over ten projects with more than 450 units that went on hold or were delayed during Q4 2008 alone, while it also appears that around a quarter of all upscale hotel rooms under development are now on hold as well,” states Mr. Nabeel Hussain, Manager - CBRE Research.
Since the start of 2009, CBRE has noted some positive elements to the current situation. These include the fact that tourist numbers remain among the highest of any Asian resort and the lack of bank financed mortgages which have played a significant role in the demise of other markets. As evidence of the island’s popularity, they point to the fact that the Ibis Patong recorded 100% occupancy during the first weekend in March, which is after the end of high season.
“In the long-term, we remain bullish on this market, since we believe that buyers of luxury and high-end properties tend to make choices based on lifestyle and not primarily on pricing. That being said, it is unlikely that demand for these high-end properties will recover before the global economy improves. Our view is that potential buyers who are able to view investment as discretionary and having little significant impact on their wealth will still be interested in the near-term,” added Mr. Simister.
Our research has shown that the effects on each sector and price segment of the island’s property market will be different. For an analyst, Phuket is the only credible market with enough transactions to offer insight on the future of Asian resort development. The Q4 report and the ongoing data collected in 2009 make for interesting reading,” concludes Mr. Simister.