By Martin Phillips, Group Managing Director, THE PHILLIPS GROUP CO LTD
This year, Phillips Property is celebrating 10 years of service in Phuket, Thailand. We are established as one of the island’s leading real estate agents and offer a select range of specialist transactional, advisory and real estate services. Not surprisingly, our clients are from all over the world. With a focus principally on the mid-high to ultra-high residential market for both sales and rent, our property portfolio is extensive and unique. This reflects the trust placed in us by our clients, who own some of the most exclusive properties on the island.
Phuket is situated just off the coast of Phang Nga Province in southern Thailand. Phang Nga was made famous in the 1974 James Bond movie The Man with the Golden Gun. Today, tourists still flock in the thousands to see the iconic limestone rock that featured so prominently all those years ago, and the area remains a stunning National Marine Park.
Phuket is an increasingly popular resort destination for both European and Asian tourists, and the island packs a powerful tourist punch for its size. At just 543 km2 (square kilometers), Phuket is slightly smaller in total landmass than Singapore at 716 km2. In 2013, Singapore welcomed 15.5 million tourists, while Phuket welcomed 12 million. Why the comparison to Singapore? Both places have something very much in common that contributes to the property market—a finite amount of land. Phuket is not getting any larger, and prime land and property has increased in and held value.
As with world-class tropical destinations worldwide and in line with increasing new wealth, there has been a vibrant second-home market on Phuket. In addition to vacation homes, expatriates of all nationalities have been settling on the island either to work or to retire. There is also a significant population of Europeans who spend the summer in Europe and then proceed to winter in Phuket.
Home ownership and understanding the law in a foreign country can always be a little daunting, and Thailand is no exception. Foreign freehold of condominiums is permitted as is leasehold of condominiums. For landed properties, the physical land can be registered for a period of 30 years and protected for further lease periods. There are other ownership structures, and these are always best implemented with good legal advice and careful due diligence. It is important that you engage sound legal advice during any acquisition.
The property market is principally a cash-purchase market. Loans are not readily available to foreigners through Thai banks, and there is limited off-shore lending that is usually against only freehold condominiums. This restriction is useful in as much as a false bubble can never be created as asset values never fall below debt levels across the broader foreign-owned market. The market is simply driven by supply and demand, with demand driven by the confidence and the strength of the local, regional and global economies.
Thailand has weathered a number of storms over the years, including the Asian financial crisis (1997), the global financial crisis (2007), political turmoil and two coup d’etats (2006 and 2014). While this may not sound too appealing to investors, individuals with knowledge of Asia and Thailand simply disregard these uncertainties as “business as usual”, and in many respects this is true.
Investors buy property in Phuket because of the unique lifestyle, culture and 36 un-spoilt beaches. Medical facilities are excellent, and the Phuket International Airport is under further expansion as arrivals increase. Property prices remain comparatively low and have traditionally provided stable returns. In fact, Thailand quite literally means “land of the free”.
Pure beachfront properties are not easily available on the market as beaches are public, and access often inhibits frontline development. Natai, just a few kilometers north of Phuket International Airport, is developing into a “pure play” luxury beachfront community. Villas here can be stunning, set on large land plots and in naturally peaceful environments. A modern villa with six bedrooms and 823 m2 (square meters) of internal living space on 3,400 m2 of beachfront land would cost around US$6.5 million.
Most luxury villas in Phuket are located on the frontlines of mountain or cliff sides on the west coast in the prime locations of Kamala, Surin and Naithon. These allow for stunning sea and coastline perspectives. Often set within a private or resort community, many villas also benefit from world-class spa and concierge services, great restaurants, tennis and fitness activities. While property values can be as high as US$20 million or more, the main transactional level is more affordable. Properties such as one four-bedroom villa with 650 m2 of internal living space and set within a private estate with full facilities that is on the market for US$5.7 million.
The middle market offers an affordable selection of excellent properties with good ocean views, starting from US$2 million. These can include high-end condominiums or smaller three-bedroom ocean-facing villas. Such properties are popular as they can be well managed while the owners are not in residence. They are also in demand by visitors to Phuket, and this in turn generates good rental income. One ocean-facing villa in a very modern style is on the market for US$2 million. A three-bedroom penthouse in an exclusive estate is on offer at US$1.95 million. Expect to pay around US$500,000 for a high-standard but modest condominium or garden villa within a few minutes’ drive of a good beach.
As well as traditional real estate, we have recently been asked to offer an island for sale. Just a short boat ride from Phuket, this stunning tropical island of some 44 hectares is available for US$153 million.
Phuket is a prime second-home destination market with property investments to suit all levels and lifestyles.