While Phuket continues to attract its fair share of extremely wealthy tourists and property investors, the number of foreigners willing to splash out 100 million baht or more for a luxury villa has been dwindling.
The “Pearl of the Andaman” these days is attracting more mass-market travellers, notably Russians and Chinese, whose numbers help offset the drop in jet-setters. Some of the latter have been put off by Thailand’s political turmoil, while others are simply looking for new playgrounds. Villas are still selling, but they are more modest, though still priced beyond the means of most mere mortals.
Previously, the demand on the island was for huge villas, with usable area of 1,600 square metres and selling prices of 100 million baht each or more. The Kamala area in particular became known as “Millionaires’ Mile” because of the proliferation of luxury residential developments, where most homes cost in excess of 50 million baht. Developments in the area share common features: low density, beautiful uninterrupted sea views and large villas with more bedrooms than average.
As of the third quarter of this year there were 1,874 villas along the west coast of Phuket from Nai Yang to Rawai beach. Sixty-four per cent of all units were in the size range from 200 to 800 square metres. Only 9%, or 178 units, offered more than 800 square metres, and the remainder were smaller than 200m². Most of the mega-villas were launched or built before the global financial market crash in 2008, especially between 2004 and 2007 when markets were booming and wealthy investors were flocking to Phuket.
Villas nowadays tend to be constructed on more compact land plots of 200 to 400m², or 50 to 100 square wah. A Knight Frank survey has identified 606 units in this category. A plot of 200-400m² can support a home with usable area of 100 to 200m².
Of the total cumulative supply, 51%, or 950 units, have been sold for less than 20 million baht each. Only 18%, or 348 units, were sold for more than 50 million baht.
The majority of the supply is concentrated in Bang Tao, with 770 units (41% of the total). This reflects the influence of the multi-resort Laguna complex. As Laguna grew in size and popularity, more high-end development was attracted to the area. It has been followed recently by more mid-market and economy villa projects.
The Laguna area remains a highly sought-after part of the island due to the range of facilities and proximity to the airport. The Laguna complex itself now contains the Banyan Tree and Dusit hotel-branded villas for sale and rent. The selling price of villas managed by Banyan Tree range from 59 million to 125 million baht a unit, while the Dusit properties are priced around 34 million baht each.
Nowadays, the majority of property investors in Phuket are expatriates based in Asia, particularly in Hong Kong, Singapore and Shanghai, although other regional markets are growing in significance. For the most part they have lived and worked in the region for a number of years and tend to know Phuket well, having spent holidays there.
The emerging markets recently are Australians, French, Canadians and Russians, as well as Asian travellers. Russians prefer larger units with three or four bedrooms, while Asians like more compact two-bedroom villas.
Of the 1,874 units available in total, 1,474 villas have been sold, representing a take-up rate of 78.7%. Annual take-up of villas before the crisis in 2008 was between 160 and 180 units per year. The figure decreased to 83 units in 2008, and 79 units in each of 2009 and 2010, before improving to 163 units in 2011. The market has since regained its momentum, with sales in the first nine months of 2014 totalling 266 units.
The highest demand now is for villas priced below 20 million baht, with 690 units sold out of 950 available in this price range, or 72.6%. Most villas in this range have two to three bedrooms, with usable area of 200-300m², located on small plots of 50 to 70 square wah.
The Phuket villa market remains attractive given that only 400 units remain for sale, while annual take-up is likely to be about 250 units. As supply dwindles over the next year or so, selling prices will increase.
Villas thus are attractive for both short- and long-term investment. The increased diversity of visitors to the island will create demand for many product segments from budget to high-end properties.
Risinee Sarikaputra is director of Research and Consultancy with Knight Frank Thailand. For more information email risinee.sarikaputra@th.knightfrank.com.