The Phuket villa and condominium market has shown solid signs of improvement over the past two years, recovering from the global economic downturn that saw foreign buyers all but disappear from the Thai market.
Both supply and demand for villas grew significantly in 2012, benefiting from the revival of the foreign buyer market. Many tourists visiting Phuket are now also looking for holiday homes.
Major buyers of Phuket properties are Singaporeans, Hong Kong residents and mainland Chinese. People buying a property in Phuket usually own property elsewhere, and in many instances they own several other properties both in the region and around the world.
Russians, Indians, Middle Easterners and Asians are emerging as the major foreign property investors.
Research by Knight Frank Thailand shows that the cumulative condominium supply in Phuket by the end of this year will reach 6,293 units, an increase of 53% since the end of 2011. The supply of new units has increased healthily in 2012, with 2,169 units in 21 new developments entering the market.
In the villa market, cumulative demand is forecast to reach 975 units by year-end, an increase of 14.4% from the end of 2011. Statistics show that 123 units in newly launched villa projects were sold this year, representing a take-up rate of around 51%.
The villa market is attractive to foreigners for both short- and long-term investment. Properties that offer a guaranteed rental return tend to be favoured by villa investors.
We are seeing an increasing number of people wishing to purely invest in Phuket, not wishing to spend much time, if any, in their properties.
Oceanfront and sea-view villas command the highest prices; as properties with sea views become rarer, their prices will increase.
The west coast of the island has been the major area of interest for investors. Most new projects launched this year were concentrated in the northwest, with a variety of oceanfront, sea-view and non-sea view villas in different unit types and price ranges.
The majority of demand during the past year has been for villas located along the northwest coast, particularly from Layan beach to Kamala beach.
In the Phuket condominium market, demand at the end of this year is forecast to hit 4,232 units, an increase from 3,037 units at the end of 2011. The mid-western area of the island, stretching from Kalim to Patong, represents the highest area of demand with 1,504 units sold.
The tourist market in Phuket these days appears to consist of two widely contrasting groups _ lower middle class and ultra-wealthy. The island for many years has been famous among the latter as a prime location for holiday homes and to purchase property for private use or investment.
According to the Department of Tourism, the number of international tourists visiting Phuket in 2011 totalled 5.89 million. That figure was expected to increase 11.6% by the end of 2012. The three largest tourist groups in 2011 were from Asia (1.6 million), continental Europe plus the UK (1.4 million) and Scandinavia (730,000).
Average condominium prices in Phuket are high, reflecting a substantial number of high-priced properties marketed to the wealthiest buyers.
The average unit selling price this year has been estimated at 12.1 million baht, rebounding from below 10 million baht during the market slowdown of 2010-11.
In the villa market, selling prices vary by unit types and the views available. Oceanfront villas naturally fetch the highest prices, with some changing hands for up to 350 million baht. Sea-view villas range from 10.3 million to 145 million baht.
Land plots with sea views are becoming scarce. Thus, the prices of beachfront and sea-view condominiums will increase as the supply shortage becomes more acute. Condominium developments are now emerging in inland areas with no clear natural attributes.
The development of oceanfront and sea-view villas, meanwhile, will shift to the Mai Khao area in the northern part of Phuket, and to Natai in Phangnga province because of the availability of land in those areas.
We project that a great number of new villas and condominiums will be introduced to the market next year. Demand for residential properties for both holiday and retirement homes among Thais and foreigners has the potential to grow due to the increasing number of retirees and tourists coming to Phuket.
The island remains a major destination for regional and global tourists and the outlook is bright.
A strong tourism industry continues to bolster the island's villa and condominium markets, and this trend is likely to continue. Despite the weak global economic situation, foreigners are still looking for holiday homes and investment properties in Phuket.
Risinee Sarikaputra is associate director of research and valuation with Knight Frank Thailand; contact risinee.sarikaputa@th.knightfrank.com.