Phuket Luxury Real Estate Market Outlook

October 14, 2021

In this article we are going to take a look at Phuket Luxury Real Estate Market Outlook.

The year 2020 will go down in history as one of the most challenging years that the world ever faced. Because of the COVID-19 pandemic, practically no part of the world was spared from the effects of lockdowns, infections, and (worst of all) deaths.

Virtually every industry — from healthcare, to education, travel and tourism, food service, manufacturing, fitness, banking, automotive, gambling, and many others — experienced significant disruption in their operations.

General Real Estate Market Outlook in Thailand

The housing and real estate industry in Thailand was no exception. With governments and people scrambling to stay virus-free or recover from its effects, buying and selling real estate seemed like the last thing on people’s minds.

Thus, the year in general was not that promising for Thailand’s real estate market. After all, many tenants lost their jobs as a result of business closures and retrenchments. Some of those whose occupations were not eligible to work from home chose to voluntarily quit their job and stay at home to minimize their risk of contracting the virus.

A lot of people who work in Thailand’s central business districts decided to return to their family homes or towns. As a result, they left behind thousands of condominiums and apartments for rent in the city. Some people even decided to move abroad.

With all of these job losses and income reductions, a lot of people could no longer pay their mortgage or their rent. At the same time, a number of property owners lost the ability to continue paying for their mortgage and other related dues.

On top of all of those, foreign travelers were also banned from visiting Thailand in 2020. This severely impacted not just the tourism industry but also sales and rentals of residential as well as commercial units.

Therefore, it is quite clear that the real estate market outlook in Thailand was not so good in 2020. A number of property developers had to hold back on their real estate projects for several months. There were huge declines in terms of property growth, condominium sales, value of properties, and so on.

It has been over a year since the pandemic began sweeping the globe, and while there are now vaccines available, the war with COVID-19 is far from over. As of October 10, 2021, 58.3 million vaccine doses have been given in Thailand, with 22.5 million of its population (or 32.2 percent) now fully vaccinated. In spite of this, the case count remains high (peaking with 23,400 infections per day in mid-August, and averaging over 10,000 new cases daily in the past few weeks). Many businesses remain closed.

Thailand has a heavy dependence on tourism, which makes up (before the pandemic hit) 20 percent of its national income. Thailand had roughly 40 million foreign visitors in 2019 before COVID, which dropped to a measly 6.7 million in 2020. That's why the country took great pains to revive its tourism sector.

One of the strategies they came up with centered around Phuket, the country’s biggest and most popular resort island. Besides being a popular attraction for tourists, Phuket has its own international airport and is connected to the mainland by one bridge. This makes it easy to screen people who wish to visit the island, whether they are arriving by air or by land.

Thus, last July 1, the Thai government launched what is dubbed as the Phuket Sandbox program: Phuket began serving as a quarantine zone for foreign travelers who were fully vaccinated and had negative swab test results. (On July 15, the country launched a similar program for the islands of Koh Samui, Koh Phangan, and Koh Tao, which they called ‘Samui Plus’.) If the said travelers continued to test negative for the virus for seven days, they were allowed to travel to certain other islands. After 14 days, they could then travel to anywhere they wish in the country.

About three months after this campaign began, it brought in around 41,000 tourists to the island, much fewer than the government’s target of 100,000 in the first 90 days. In contrast, the island welcomed almost 10 million foreign visitors in 2019.

To further improve the campaign's effectiveness, the government relaxed some of the program’s rules last October 1. They lowered the maximum required stay on the island from 14 days to seven days. Only two COVID tests will now be required within that time frame, and vaccinated travelers from all countries can visit, instead of just 'low-risk' places.

In addition to that, because of the country's limited supply of vaccines, the government decided to prioritize residents in tourist areas like Phuket and Koh Samui (another popular tourist island), to speed up their reopening.

Phuket now has over 83 percent of its population fully vaccinated (majority of which, however, were with the Sinovac vaccine, which is reportedly less effective than other vaccines against the Delta variant, which is currently sweeping the world). As a solution, the government began giving booster shots of the Astra-Zeneca vaccine to people who received Sinovac, but using less dose than normal.

Considering current circumstances and all of these changes, what are the prospects for the luxury real estate market in Phuket? Let’s take a look at the facts.

Luxury Real Estate Outlook in Phuket

The number of units sold from January to June 2020 dropped by 71.2 percent year-on-year, and 9 out of 10 of those were investment-type properties, majority of which came with rental guarantees. Phuket’s luxury real estate sector experienced a massive 75 percent year-on-year reduction between 2019 and 2020.

Although it is understandable that many property investors feel anxious about investing in luxury real estate in Phuket because of the current situation, savvy buyers are aware that now is actually a good time to do so. There are several reasons behind this.

First of all, prices have gone down in many parts of Phuket as early as the first quarter of 2020. If you have the cash ready or a good credit score, you can snag some great luxury properties at much lower prices.

On top of that, many previously interested buyers seem to have been turned off by the idea of buying at this time and would rather rent real estate, thus increasing the demand for rental properties. In relation to this, since there are currently fewer investors in the Phuket luxury real estate market, it’s now easier to negotiate for a lower price.

Among the many areas in Thailand (and the rest of the world, for that matter), Phuket has one of the most optimistic markets, being a popular tropical destination that beckons people all year round — pandemic or not. As the Thai government implements more and more strategies to reignite tourism in Phuket, more and more people from all over the world are expected to return to Thailand either for a vacation or permanent residence.

History teaches us that despite crises like this pandemic, countries and their economies always rebound in due time. Thus, investing in luxury real estate — particularly in a popular destination like Phuket — seems like a wise decision, particularly at this time when properties are at bargain prices.

It’s also worth noting that curfews and other social restrictions during the first two quarters of 2020 led to the delay in the construction schedule of several projects. Thus, only five villas were finished in the second half of 2020, joining the total current supply in all grades of almost 4,300 villas all over Phuket.

In the luxury real estate market (where prices are at least 90 million Thai baht per villa), the total supply by the last quarter of 2020 was just 320 villas. A mere seven new luxury villas are expected to be finished this 2021, and there appears to be no new supply that will be added in 2022. From this data, it seems like the luxury villa supply will be very limited in the next few years, and land plots for top-end villa development in Phuket are bound to be harder to find.

Easy entry to the island through the Phuket International Airport, convenient visa application and processing for foreign nationals, first class hospitals and attractions, beautiful beaches, a relaxing tropical ambiance, and low density of residents make Phuket even more attractive now to investors, particularly retirees.

Many of these properties for sale in Phuket are turnkey and sold “as seen” — which means that they are fully furnished and decorated, and thus, ready for people to move in to. While many of these buyers purchase for investment, the majority of them are using the luxury properties for themselves in the meantime. Because of this, more prospective buyers now prefer to see properties with their own eyes; high-resolution pictures and videos are no longer enough for these people.

Phuket Luxury Property Investors

As shocking as it may seem, the pandemic seems to have minimal to no effect on mega rich investors. More than 5 billion Thai baht (around $167 million USD) in primary and secondary high-end properties were sold at the height of the pandemic.

Property sales are still not as high as pre-pandemic, but things are improving compared to 2020. According to research from Thailand consulting group C9 Hotelworks, top-tier real estate transactions in 2020 reached its highest level in five years, regardless of flat trading numbers in the general marketplace.

With overseas travel off the table or made extremely complicated by COVID restrictions, many wealthy individuals turned to buying huge tropical island mansions with four or more bedrooms. Many of them are also bothered by increasing air pollution concerns in Thailand’s major cities.

C9’s Managing Director Bill Barnett explained that “country living and estate villas in the age of pandemic are a strong reaction driven by both internal and external factors.” He adds that the country’s richest were “effectively stranded in the country for nearly a year”, thus making them appreciate Phuket once again or even more.

Greater emphasis for health and wellness, as well as the value of personal space, have also made villas and other low-density property developments more appealing. This is particularly true among people with ample financial resources. In fact, many of the buyers during this pandemic are seeking low-rise residential or single houses compared to before the pandemic.

Phuket now also appears to be the perfect pandemic getaway for many foreign nationals, particularly wealthy East Asian families and retirees from Singapore and Hong Kong. They make up a huge chunk of the buyers of luxury real estate properties in Phuket. These investors are mostly looking for remote second homes that are ready to be used for WFH (work-from-home) arrangement.

Inquiries for Thai property by Chinese nationals also jumped 38 percent in the first three months of 2021 compared to the year before — an arguably minimal yet clearly positive change.

Tips for Investing in Phuket’s Luxury Real Estate Market

Barnett predicts that the Phuket luxury property market is looking good for primary residences. He also noted that there’s great interest coming from high-net worth people in the country’s capital and other capitals in the region (like Singapore and Hong Kong).

If you have the cash (or the credit) to invest in a luxury property in Phuket, now is probably one of the best times in this decade to do so. Here are some facts and tips that can help you:

• Start early. A large investment may not be as important as an early one. While many people are scared to invest at the moment, good investors know it’s actually a great time to do just that. If you want to get back some return on your investment as soon as possible, look for properties that are ready for use so that you can rent them out right after purchase. Or you may enjoy using them yourself right away.

• Choose the right area for your investment. Ideally, this would be in a place that’s attractive to both residents and tourists. By doing so, you increase the odds of making money from your luxury investment property in Phuket by using it either as a long-term rental or holiday rental.

• Opt for low-maintenance properties. If you’re too busy, chances are, you’ll find it hard to keep your property in tip-top condition over the years. Therefore, it’s better if you look for properties that are maintained by the developer and/or which have available caretakers to look after them. Your luxury property should be a source of pleasure and/or wealth — and not of undue stress.

• Team up with an experienced and trustworthy real estate lawyer. Unless you’re familiar with all of Thai real estate laws, having a competent lawyer on your team is your best bet to ensure that you get the best outcomes from your Phuket luxury real estate market investment. A legal expert can help ensure that you and your investment in Phuket are completely secure. Keep in mind, too, that certain kinds of property come with risks, and there are multiple property investment traps that you should be wary of.

• Make sure your finances are in order. Many eager buyers (especially first-timers) make the mistake of spending too much time looking through properties that are beyond their budget. Although many owners and developers are open to negotiation, it will save both your time and everyone else’s if you limit the properties you’ll consider to those that are up to roughly 20 percent higher than your best budget. This way, you can focus your energies on luxury properties that are right for you, and be able to make a decision faster — before other buyers grab those opportunities themselves!

• Be aware of all expenses involved. In relation to preparing your finances, it’s important to know other costs that come with buying a property in Phuket, Thailand. For example, there are taxes, legal costs, government fees, and more. A good rule of thumb is to prepare around 4 percent of the sales price to your budget.

• Choose the right furnishings depending on your purpose. Last but not the least, once you find the luxury real estate property of your dreams in Phuket, think about the furnishings. The first question is whether you will furnish it at all. Based on recent market trends, tenants prefer furnished properties — and, of course, if you’ll live in it (whether temporarily or for good), you definitely need furnishings as well. Estimate the cost of such furnishings and make sure to add the total to your financial projections. If you’re buying a property primarily to rent it out, it seems wiser to spend on furniture and appliances that will stand the test of time (and focus a bit less on aesthetics) if you’re on a limited budget. This is because things deteriorate much faster when used by tenants (particularly if they’re under short-term contracts) compared to when used personally or in the long term.

Conclusion

In spite of this COVID-19 pandemic, Phuket, Thailand remains an attractive place for luxury real estate market investments. Moreover, the market is recovering and witnessing a positive growth since last year, fueled both by wealthy foreign nationals and locals who have come to appreciate or recall its wonders.

Although limited, there are still a good number of luxury properties for sale in Phuket, and during this pandemic is a good time to invest, so start looking for one that matches your purpose, budget, and preferences today!

Visit Conrad Properties to See the Best Properties for Sale in Phuket