Why Invest Phuket Oct08

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Here are some good reasons why you should invest in Phuket and buy The Mangosteen resort & Spa

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Why Invest Phuket Oct08

  1. 1. Why Invest...Phuket October 2008 Specially Produced By
  2. 2. Welcome Message Discerning Buyers Of Luxury Resort Property Still Looking Towards Phuket Welcome to the very first edition of Why Most of the visitors to Phuket, who first arrive Invest…Phuket, the latest issue in Raimon Land’s as tourists, see what it has to offer and either Why Invest series of research documents. The return for longer vacations or want to buy their purpose of this publication is for our research own property. They are A-class travellers and team to present the latest facts, figures and have the disposable income to inject many Contents trends relating to Phuket’s luxury condominium millions of baht in international currencies into market so investors are equipped with the island’s economy. quantifiable tools in their decision-making. Phuket is a place where one truly understands We have also sought expert opinion by the concept of “lifestyle investment”. conducting our inaugural Phuket Forum (see page 8) where senior local government officials Our experience also leads us to conclude and major stakeholders in the future of Phuket the Phuket property market is basically based and its economy gathered to talk about current on cash transactions. You will never see a issues in the property and tourism sectors and reputable developer of quality condominiums Investor 03 Profile the longer-term potential for these industries. or villas cut the price of their real estate just to raise quick funds to pay back the bank. It is not Investments 04 and Returns Phuket has gradually escalated to become a discount enviroment and all indications are one of the top resort destinations in Asia, if not that it never will be. The majority of developers Leisure 06 and Lifestyle the world. With approximately 2.85 million are well-financed individual entrepreneurs and international and domestic arrivals at Phuket’s they will not build what they cannot sell. Phuket 08 Forum airport during 2007 - with even more traffic expected this year - Phuket is surging ahead of That is not to say you should not seriously check Investor 14 Profile competing destinations such as the Caribbean, the credentials of the developer in the project Bali, the Maldives, and Hawaii. you choose. Legal 15 Guide With all of these tourists to the island paradise, Because of the demand for Phuket condominiums Resources 16 Tourism many wish to return and also convince their and villas, realistically we will not see an family and friends to visit. This is providing a oversupply situation but I feel we will certainly Resources 17 Investment solid platform for the continued growth of the see some projects not being built. property industry as an increasing number want Resources 18 Condominiums and Villas to own their own piece of Phuket in the shape Our two developments, Kata Gardens and of a second home, retirement condominium or The Heights, were clear successes and Resources 22 purely as part of their investment portfolio. demonstrated a genuine demand for high- Land Values and Transactions quality properties on the island. Resources 23 With the continued upgrade of infrastructure on Key Conclusions Phuket also providing a fine living environment, We see a shortage in the top-end of the the investor could do well to look towards market, and will definitely continue to add Methodology some of the upmarket condominiums and villas new projects in the pipeline to capitalise on The information contained in this report covers the condominium projects surveyed on available in the market. the long-term growth of the island. Phuket. The data covers only condominium and villa projects that have been launched since January 2003 as Raimon Land believes that this marked the starting point of the recovery in the Thai condominium market. Raimon Land collects this data by surveying With local authorities investing in and I hope you find this document both insightful the listed projects on a monthly basis through a variety of direct sources, including site visits and interviews with marketing officers, sales representatives and local real estate approving permits for the construction of and compelling, presenting the facts and data agencies. For more information on the data and/or methodology included in this report, hospitals, golf courses, international schools, required for any astute investor. If you have any please contact the Raimon Land Research Team at +66 (0) 2651 9601. This document can be downloaded from www.raimonland.com retail developments, five-star hotel complexes, comments or queries, please do not hesitate to and a planned extension of the airport – there contact our research team. Disclaimer Although Raimon Land sets the highest possible standards for its research, it cannot be is no reason tomorrow’s asset prices will not held responsible for any inaccuracies that occur. As a result, Raimon Land accepts no adjust to other more traditional worldwide liability for any errors and/or omissions contained within this report. destinations. Copyright Nigel Cornick All rights reserved. Reproduction in whole or part without written permission is strictly prohibited. For permission to reproduce, any or all parts of this research please contact Chief Executive Officer Raimon Land at +66 (0) 2651 9601 Raimon Land Plc Delivering Asia Communications Produced and compiled by Mark Armsden and David Johnson of Delivering Asia Communications. www.deliveringcommunications.com Raimon Land Research ©2008
  3. 3. Investor Profile Lifestyle Investment Thai property investor, Kosit Doungsuwan, purchased a condominium at Raimon Land’s Kata Gardens project. Here he explains that a combination of Phuket’s international profile, high-quality infrastructure and family appeal made this a sound investment. Why do you consider Phuket a good Bangkok, which makes it easy to visit, and investment? the fact that it’s such a beautiful place to visit all year round. I also enjoy the wet season in Phuket. I don’t think there are other destinations Phuket is a well-known resort among like it that offer so many activities for everyone international travellers and the value of luxury so close and easy to get to from Bangkok. condominiums will increase over time as the more desirable land sites become scarce. What do you see as the lifestyle Phuket is also progressing very fast in terms of advantages of being located in Phuket? infrastructure without compromising its natural environment. The condominium I bought at There are so many different things to do on Kata Gardens is a dream resort home for my Phuket for those who like an active lifestyle such family and Iand when I am not there, I have the as golf, sailing, diving, fishing and bike riding. option to rent it out as all the good hotels are The list goes on. It also has a very relaxing booked up during the high season. atmosphere and one can just sit on one of the What criteria did you use to select wonderful beaches all day if you like. The food this (Kata Gardens) investment? is also fantastic and there are many excellent restaurants and world-class hotels to choose from to dine in or just have a drink. Some of The location of this little village is ideal for a the best spa and massage places in Thailand family with children. There are many good are also on Phuket. I can’t speak highly enough restaurants within walking distance and the of the island! beautiful Kata Noi Beach is very close by. Being built by a reputable developer like Why did you select a Raimon Land Raimon Land also helped making the decision development? easier. Do you see luxury development Raimon Land’s reputation among Thai and values increasing in Phuket in the foreign buyers as a company that delivers coming years? Why? on its promises for its developments, not only in Phuket, but in all the cities it constructs condominiums, is second-to-none. Anyone who In the long run the values of luxury developments buys into a Raimon Land development knows will increase for sure. Wealthy individuals they are going to get quality. The design, are willing to pay for quality and price is a concept and the quality of the finished project secondary issue. Rest assured there are a lot at my Kata Gardens condominium exceeded of quality condominiums coming on line in my expectations as well and also – importantly Phuket. – all staff I dealt with during the entire process, How important is Phuket’s location and even now, have been fantastic. for you and why? There are so many flights to Phuket from Raimon Land Research ©2008
  4. 4. Investments and Returns Phuket Leads Way For Luxury Resort Property With its idyllic beaches, international airport and some of the best infrastructure in any of Thailand’s main centres, Phuket has become a haven for the jetset and those seeking a first or second – or third – home in the sun. Phuket’s environment and climate have provided an excellent platform for a booming luxury property market that is seeing smart investors in reputable projects reap significant rewards. Expanding coast, Cape Panwa, the Layan area and Patong, Surin, Kalim, Karon, Mai Khao Market and Naithorn Beaches. Rawai Beach’s first project was launched in 2007. Condominium buyers also find a diverse Phuket pioneered Thailand’s resort area market in terms of pricing, with units ranging condominium market in 2003 with the from THB55,000 to THB140,000 per launch of the 15-unit Maan Tawan on Bang square metre (psm) in 2007 with an average Tao Beach. The second half of the year sold price of THB101,203 psm. Views, brought three projects to Kamala Beach, beachfront access, quality finishes and fit namely The Plantation and Kamala Hills, outs and location are key factors determining and the 48-unit Breakers to Kata Beach to prices, with projects on the western coast lift the island’s unit count to about 150. fetching the highest psm rates. Phuket has continued to exhibit strong The average price for Phuket condominium potential over the ensuing years with units, which are generally much larger in 316 units launched in 2004, 545 units size than those in other Thai resort areas, in 2005 and 690 units in 2006. In spite was THB15.9 million in June 2008. The of hesitancy in introducing new supply in island currently has approximately 1,450 2007 (101 units), demand remained strong units still in the construction stage. with recorded sales of 214 units. By H1 08, 48 projects with 2,202 units had been Many credit the travel and hospitality launched on Phuket with half listed as sold, industries with paving the way for Phuket’s with 168 of those being sold in the fist half rise as a luxury condominium hot spot. of 2008. Tourists come to Phuket, enjoy the island’s lifestyle, and look to purchase a second Developers have been selecting diverse home as an investment or a place to spend locations, expanding from Bang Tao, Kata their retirement. and Kamala Beaches to the north-east Raimon Land Research ©2008
  5. 5. Phuket’s tourism industry is drawing these people in increasing numbers and its 2007 performance showed that despite the country’s political turmoil, it continued to deliver high load factors to airlines and strong occupancies for hotels. Passenger arrivals at the Phuket International Airport jumped over 20% year-on-year in 2007 to 2.8 million, and 2008 looks even stronger with air arrivals from January to May hitting 1.4 million to place this year’s estimate of 3.2 million well within reach. Phuket’s devastating 2005 season now appears as only a wrinkle in an otherwise strong and growing destination. High Long-Term Investment Potential both in rental yields and capital gains as metre units are seasonal, with the 32-day indicated by the soaring prices of units sold peak season hitting 90%, high season’s Australia supplied the most visitors in 2007, at many of Phuket’s luxury projects. 161 days reaching 70% and the 172 followed by the UK, Sweden, South Korea days of low season at 40%. Rental prices and Germany. The first quarter of 2008 Units at The Heights Phuket launched in early are also seasonal, with peak season pulling found Sweden with 10% of all arrivals. 2006 at THB79,680 psm were selling for in USD250-495 per night, high season THB96,781 psm by the end of 2007. bringing in USD175-385 per night and low In line with tourism numbers, most foreign Similarly, The Accenta Phuket launched in season USD135-200 per night. property buyers are British, American, the third quarter of 2005 at THB74,000 Australian, Swedish or German, who psm and climbed over THB100,000 psm The annual net rental income for the best together create a strong base for alien by the end of last year, while Mövenpick performer at Kata Gardens, a 253-sqm ownership. However, Russia recently Residences Karon launched in Q3 2006 at three-bedroom unit purchased in 2005 for surged ahead, with China and South Korea THB108,000 psm hit THB135,000 psm USD533,971, will hit USD53,530 this year demonstrating increased interest in Phuket not long after. for a gross rental yield of 10%. The largest property. (382 sqm) and most expensive (sold for Though it may be wise to avoid developers USD723,676) unit will realise USD62,028 Eastern Europeans from Estonia, Slovenia guaranteeing annual gross rental yields of in net rental income in 2008 for a gross and the Czech Republic are joining 10%, this level can certainly be achieved as annual yield of 8.6%. Scandinavians as important buyers, and seen at Kata Gardens, where 6-10% yields reflect the continued trend for Europeans are being realised and handsome future For those searching for a second home and to purchase second homes outside their capital gains are expected. a sound investment, Phuket’s current market traditional resort destinations. conditions are signalling strength in rental Raimon Land research indicates potential yields along with excellent capital gains that Those who turn to Phuket can find excellent occupancy rates for the 180-250 square are poised to continue well into the future. opportunities for strong long-term returns Kata Gardens Rental Return 2008 Yearly Purchase Purchase Yearly Annual Net Gross Rental Occ. % Rates Size (Sq.m) No. Unit Type High* Peak* Rental (USD) Fee (USD) Income (USD) Date Yield (%) Low* Peak* Low* High* Price(USD) 17,875 2005 71,406 200 495 10.0% 253 533,971 90% 70% 385 53,530 40% 3B 1 8,996 2005 35,886 120 255 9.9% 186 272,250 90% 70% 180 26,891 40% 1B 2 8,996 2005 35 ,886 120 255 9.7% 186 276,618 90% 70% 180 26,891 40% 1B 3 20,708 2004 82,736 235 570 8.6% 382 723,676 90% 70% 445 62,028 40% 3B 4 8,733 2005 34,835 115 250 8.0% 180 327,250 90% 70% 175 26,102 40% 2B 5 8,733 2005 34,835 115 250 7.5% 180 350,000 90% 70% 175 26,102 40% 2B 6 10,069 2005 40,180 135 290 6.7% 276 448,250 90% 70% 200 30,111 40% 2B 7 10,069 2004 40,180 135 290 6.6% 276 455,441 90% 70% 200 30,111 40% 2B 8 10,069 2005 40,180 135 290 6.3% 276 477,941 90% 70% 200 30,111 40% 2B 9 Source: Raimon Land Research Note: * Low = 172 days, High = 161 days, Peak = 32 days ** 1USD = 34 Thai Baht Raimon Land Research ©2008
  6. 6. Leisure and Lifestyle Perfect Tropical Climate Not only does Phuket offer investors some of the most prestigious resort addresses in the world, the island is also a haven for those who love participating in an outdoor lifestyle. With warm weather all year round and a predictable wet season, Phuket is a paradise to aspire to. Five-Star Lifestyle kilometre secluded shore, upscale Nai Harn and Rawai, a launch point for sailing and diving. Destination Air access to the island is getting easier, with the island’s airport serving more than 40 carriers and some 285 international and Phuket has definitely established itself as one of Asia’s - if not the domestic flights per week with direct connections to 22 Asian world’s - most sought after beach resorts due to its range of high-end and European cities. High-season charters widen the global radar lifestyle options, wide choice of pristine beaches and easy access screen, while the jump from Bangkok takes only 60 minutes. via the Phuket International Airport. As an international lifestyle destination, Phuket now serves a growing The island’s sports and leisure activities combined with all the number of private jets, with the airport handling close to 1,000 conveniences of a cosmopolitan resort are attracting growing arrivals and departures last year. numbers of high-profile investors, including 2007 Formula 1 world champion Kimi Raikkonen, who recently purchased a beachfront Phuket’s rising popularity is grounded in its broad selection of villa. leisure activities that can be enjoyed throughout most of the year, as temperatures remain in the 23-32°C range. The wet season Of Phuket’s many beaches, Patong’s activities and nightlife make it from June to September brings brief showers, while mild weather the most popular. Karon’s less-crowded stretch of sand offers a full dominates from October to February - perfect for land and water- range of facilities, while Kata’s quiet beach attracts families. Bang based endeavours. Tao features luxury resorts and villas matched by lifestyle activities along its six-kilometre beach. Divers flock to Phuket for its colourful reefs, unusual underwater rock formations and variety of marine life. Anglers find big game sport Phuket’s famous Laguna resort district is also a hive of activity with five- fishing for marlin, sailfish, tuna and swordfish. star international hotels, luxury condominium and villa developments and its own stretch of unspoiled beach. Golfers can play 18 holes on the island’s eight golf courses, topped by the Blue Canyon Country Club, twice the host of the Johnnie Pansea Beach houses exclusive resorts, and Surin is known as a Walker Classic. The Banyan Tree Golf Club in Bang Tao Bay’s celebrity haunt with six-star accommodation. Other beaches include exclusive Laguna Phuket and Mission Hills’ 18 holes carved through out-of-the-way Kamala, Nai Yang and Mai Khao’s combined 10- Phuket’s mangroves also offer challenging and scenic rounds. Raimon Land Research ©2008
  7. 7. Laguna Phuket Golf Club Shoppers will discover most of the products cuisines, headlined by fresh seafood. Most they use at home in Phuket’s modern malls, top hotels offer gourmet dining, as do several markets and superstores found mostly around stand-alone restaurants. Mom Tri’s Kitchen in Patong. Central Phuket Festival features a Kata Noi has been a mainstay for years, variety of shops and the Central Department Silk in Surin offers exquisite surroundings, Store sells major brand names. Bargain and the daily catch can be savoured at hunters head to Jungceylon’s many shops reasonable prices at Tonsai Seafood. and the Big C Hypermart. International There is also a growing presence from Infrastructure international lifestyle brands such a Louis Vuitton, Gucci, Prada and Rolex to cater Angsana Spa, Laguna Beach Resort Phuket International Hospital, Bangkok to high-end shoppers along with a growing Phuket Hospital and Mission Hospital Phuket luxury yacht industry. provide world-class facilities and treatments such as dental and eye care, cosmetic Long-stay visitors over 50 years of age qualify surgery and kidney dialysis. These hospitals for retirement visas, and a list of reputable in Phuket are also managed by staff who law firms can facilitate the immigration speak a range of foreign languages. process. As some indication of this, during 2007 some 8,000 foreigners applied for For education, the British International School long-term visas, of more than three months. (BIS) – formerly the Dulwich International College – offers a British education A thriving expat community regularly meets from kindergarten to year 13 and QSI at special interest organisations. The sports- International School of Phuket follows an minded can join cricket, golf, tennis and Sailing is also very popular in Phuket. The American curriculum from nursery to grade squash clubs. The Phuket Yacht Club serves island hosts international competitions 12. the island’s growing sailing community, including the prestigious Phuket King’s Cup and Phuket also houses chapters of the Regatta, Phuket Raceweek and the Phang As a prime example of the diversification Lions and Rotary clubs as well as the Phuket of Phuket’s population, as of August International Women’s Club. Nga Bay Regatta. 2008 there are 30 different nationalities Outdoor representing 862 students attending BIS. Phuket’s range of beaches and leisure Activities When one considers that 398 – or 46.3% options along with ease of access, tropical of these students are Thai, students from 30 climate and expanding facilities set the other countries make up the remaining 464 island apart as it grows in status as a top The island offers some 800 berths at five attendees. international lifestyle destination. marinas, with the award-winning Royal Phuket Marina standing out as Asia’s most Diversification of Student sophisticated yachting haven, combining Nationalities luxury waterfront living with a state-of-the- at Phuket British International School art marina. Its under-construction Luxury Residence condominium units, penthouses Nationality Number of % of School and villa estates boast private yacht berths. Students Population Thai 398 46.3 British 148 17.1 This level of upmarket accommodation Australian 50 5.8 typifies the latest trends on Phuket, where South Korea 32 3.7 luxury hotel brands are continuing to come American 26 3 Swedish 24 2.8 on line. Globally respected branded five- French 23 2.7 star residences such as Banyan Tree, Four Canadian 22 2.6 Seasons, Shangri-La, Outrigger, Park Hyatt, German 22 2.6 and Mövenpick have also become part of Russian 16 1.9 Other Nationalities 101 11.5 Phuket’s property scene. Totals 862 100 Visitors to Phuket can enjoy a variety of Source: Phuket British International School Raimon Land Research ©2008
  8. 8. Phuket Forum BRAND PHUKET - THE NEED TO WORK TOGETHER Decades of tourism success have fuelled a dynamic and profitable property sector on Phuket. The fledging industry is experiencing enormous demand but many key issues remain unresolved if the industry is to realise its full potential. The future of the property industry on the island was debated at the inaugural Phuket Forum at which key private sector stakeholders and local government officials shared their views. told delegates at the Phuket Forum: “These such as regulations, water and a co-ordinated Over the last five years Phuket’s luxury real days, real estate investors come here from public transportation system.” estate industry has undergone an astonishing many countries, from Thailand, Hong Kong, transformation. Backed by a thriving tourism Singapore, Australia and Europe. Mr Cornick said growth more recently had industry, the Andaman Sea island has, over been relatively unbridled and unregulated, a short period of time, forged a position as “The property boom has created some which had raised a few red flags. Asia’s premier resort destination for investors problems, as well as many opportunities seeking a luxurious first or second home or because it has grown quite quickly. The “What we have seen in the last two years has addition to their investment portfolio. main issues are security and sustainable been an explosion of real estate and a lot of development. These are crucial to the long- it I am afraid is in a ‘real state’ as it has no Property developers have moved quickly and term success of the industry.” fundamental backing behind it and that is a in no time the sector has established itself as the concern for all of us. island’s highest revenue earner after tourism. Raimon Land Chief Executive Officer, Nigel Cornick, agreed that the speed of development “I think we are going to see, over the next However, the real estate boom has created a has highlighted a number of challenges. 12 months, projects that have taken people’s double-edged sword for the island. Concerns money not being built. It is not a question of have been raised as to how to ensure the “In the last five years Phuket has moved ahead just preparing a glossy brochure and putting sustainable development for the industry in leaps and bounds and there is no doubt it up some banners. The hard work does not while meeting the requirements of local and has a huge future as there is no shortage of start until the project is financed and trying to overseas investors, and maintaining vigilence capital or desire to invest,” he said. get it built and completed on time to budget in not destroying the island’s environment. and to promised specifications.” “The negative sides are infrastructure related, Phuket Vice-Governor, Smith Palawatvichai, Raimon Land Research ©2008
  9. 9. Phuket Forum is completed. Air parking space will increase Mr Cornick added that it was important for the needed to be put in place. form 15 to 33 aircraft.” industry to get together to solve problems and devise enduring solutions so the bright future of “We only need a few unscrupulous developers The Tourism Authority of Thailand (TAT) recently the island could be realised. on the island to kill the golden goose. We need changed their marketing strategy for Phuket to to grow in a very progressive, sustainable and focus on revenue generation rather than arrival “Raimon Land is really committed to Phuket. fashionable way.” numbers, which they hope will bring further We have sponsored the King’s Cup Regatta economic benefits to Phuket. for five years and we have just signed up for C9 Hotelworks Managing Director, Bill another five years so we are definitely here Barnett, recommended that one step that could TAT Assistant Director, Anoma Vongyai, said: to help promote Phuket as the premier resort immediately be taken was to tax the 10,000 “The Tourism Authority of Thailand is changing destination in Asia and one of the best in the villa rooms the same as hotel rooms. the way it markets Phuket to aim at quality world.” rather than quantity. Phuket is the major focus He said that outdated legislation was holding of our new direction so that we can attract back introducing the taxation, which in Upmarket Destination high-spenders from markets around the world turn could create revenue for infrastructure to the island rather than just concentrate on investment on the island. numbers.” The growth of the luxury property sector has gone hand-in-hand with a number of other “There is no parity between the Hotel Act Ms Anoma added that while the numbers developments that are creating a prestigious and the Condominium Act in terms of having arriving in Phuket were good, there should be profile for Phuket at home and abroad. condominiums being able to obtain hotel research carried out into the island’s capacity licenses,” he said. in terms of infrastructure limits and human A number of international branded projects resource shortages, ensuring it can cope with are being launched on the island, such as “There are many condominium projects that increases. the Jumeriah, the Taj, Banyan Tree and the would like to register as hotels, but there is no mechanism to address these freestanding Thailand’s national carrier, Thai Airways villas or small villa resorts.” International (THAI), is very much onboard with the TAT’s new course. THAI’s District Sales Manager (Phuket), Chantouch Srinilta, said that Phuket contributed more revenue to THAI that any other of its global resort destinations. “Sales of flights to Phuket through our sales offices around the world makes up over 10% of total sales revenue. It is even higher in Japan, where Tokyo is 20%. This includes a lot of business people, both Thais and foreigners,” Mr Chantouch said. Raimon Land Chief Executive Officer, Nigel Cornick “In the last five years Phuket has moved ahead in Thai Airways International District Sales “Such is the demand that we recently added leaps and bounds and there is no doubt it has a Manager (Phuket) Chantouch Srinilta two daily flights onto our schedule. And this huge future as there is no shortage of capital or “Sales of flights to Phuket through sales office desire to invest.” is during the low season. Phuket was the only around the world make up over 10% of total sales revenue. It is even higher in Japan, where Tokyo destination in the world (among THAI’s global is 20%.” Shangri-La which are bringing brand equity network) who requested additional flights. This to the island and helping promote Phuket is good news for Phuket.” Property Pipeline abroad. Room Inventory Oversupply and controlling oncoming stock is The airport, it was confirmed at the Forum, another issue that requires attention. According will undergo a massive overhaul to the tune to documents from the Land Department of THB5 billion with the construction of a new However, industry leaders present from the presented by Phuket Real Estate Club President, international terminal to be completed within tourism sector expressed concern that room Tanan Tanphaibul, 36 projects applied for five years. The current terminal will be used for inventory supply could be growing too fast. land development licenses in 2007, but there domestic flights. Phuket has more than 40,000 hotel rooms were already 22 applications in the first six in all categories, and a further 10,000 months of 2008. Thai Hotels Association (THA) Southern condominium units and villas that are managed Chapter President Methee Tanmanatragul, for rental. However, Jones Lang LaSalle Managing said: “Passenger capacity now is 6.5 million. It will be up to 11 million when the upgrade THA’s Mr Methee said stringent regulations Cont.P 10 Raimon Land Research ©2008
  10. 10. Phuket Forum oil prices are affecting investor sentiment. So in the banking industry allowing foreigners to Phuket will see a slight market correction but borrow money and have freehold property, the not of the same scale as Bangkok or even sky is the limit in terms of how far the industry Pattaya where we see more serious oversupply could grow,” he said issues,” Ms Suphin added. Human Resources Cash Buyers As well as the hardware side of development, While there is much that can be done to the software that has established the unique improve the property landscape in Phuket there foundation upon which Thailand tourism are a number of positive trends that continue industry is based requires further development to drive the market forward, particularly in the agreed the participants. luxury sector. Indeed, such is the demand for high-quality Thai Hotels Association Southern Chap- One of these is the high quality of buyers who service that hotels in Dubai and Macau are ter President, Methee Tanmanatragul “We only need a few unscrupulous developers continue to be interested in the island, by enticing Thai hospitality staff abroad. on the island to kill the golden goose. We need paying premium real estate in cash. to grow in a very progressive, sustainable and THA’s Mr Methee said that a survey conducted fashionable way.” Mr Barnett said: “There has been a lot of by his organisation revealed the service Director, Thailand, Suphin Mechuchep, movement in the upper tier of the market, provided by Thai staff was by far the quality expressed confidence that demand would particularly in the THB100 million sector and most appreciated by overseas guests and the meet supply despite the current short-term above, and there have been a number of very difficulties, largely related to the faultering healthy transactions in the first six months of this world economy. year, with take up rates of one to 1.3 units per month in this price range. “I believe that once the world economy starts to see the bottom and people see positive signs, “There is also a fast sales pace in the THB40 they will come back to invest,” she said. million range and above, so there are good positives right now even with the way the “In the medium and long-term, Phuket is a world economy is moving. There is money at lucrative investment and the real estate industry the top end of the market where supply and will continue to grow in a sustainable manner. demand is very favourable.” I am very upbeat on Phuket. Cash-rich people still need to have a vacation.” Mr Barnett added the fact that cash was king in the luxury sector was very encouraging. Ms Suphin added that the local investment situation was a little different given a range of “The biggest upside of all is the absence of Tourism Authority of Thailand Assistant political and economic issues. debt, with 90% to 95% of overseas buyers Director, Anoma Vongyai “We are changing the way we market Phuket purchasing with cash. If there was greater to attract target high-end travellers. We have “The local market situation is different as foreign ownership quotas, debt became changed our marketing strategy to focus on rev- inflation, rising interest rates and skyrocketing available and there was more sophistication enue not on arrival numbers.” 10 R a i m o n Land Research ©2008
  11. 11. Phuket Forum major reason that inspired repeat visits to Phuket has also been a resurgence with Phuket too and Thailand. as other areas are developed. It is no longer just west Phuket and the more it can all be “Our survey of hotel guest comments shows marketed together is very important.” people are the heart of the tourism industry as 80% of comments touch on the staff. The Raimon Land’s Mr Cornick added that he was room maid, the waiter, the reception manager not sure that land availability was a key issue. or the gardener they like, with facilities and restaurants way behind,” he said. “A good site is always available if you are prepared to pay the money. Our experience The question is, can it be sustained given the has been is that if it is the right site, you go number of existing hotels and properties and in and buy it at THB17 million or THB18 the pipeline of projects coming up? million a rai as by the time you get round to developing it, it will be worth THB20 million or “With the availability of 50,000 rooms you THB25 million per rai,” he said. Raimon Land Director of Operations - Phuket, Steve Brajak need to find good staff to provide the level of “At the top end where we operate there is not too luxury service which people expect,” said Jones “The problem for us now is that with the much speculation.” Lang LaSalle Associate Director Management combined high construction costs and the development forever. Solutions Thailand, Dexter Bryn Norville. additional marketing costs, the margins are not as good as they used to be in Phuket.” “Buyers would be advised to do proper due diligence and look at what legislation is in The Next Steps place to protect them as there is not much out there to assure investors that in 10 to 15 years time you will be owning that type of product,” Mr Smith said it was time for greater co- he said operation and discussion and he hoped the Forum would be the start of many discussions to assist in developing the island. Greater Phuket “It is time for all partners of Phuket, whether it Although the Phuket continues to flourish, is government, the private sector or overseas there was a school of thought expressed investors to join hands and develop the island by all participants that due to issues of as a world-class destination. We need to build land availability, pricing and thirst for new the dream together,” he said. destinations, an area touted on the mainland as C Hotelworks Managing Director, Bill “Greater Phuket” could emerge to encompass Jones Lang LaSalle’s Ms Suphin agreed, Barnett “The biggest upside of all is the absence of debt, Phang Nga, Krabi and Khao Lak. saying that all sectors needed to “work as with 90% to 95% of overseas buyers purchasing one” to keep Phuket as Asia’s premier resort with cash.” “In Phuket there has been a shift in the last destination. two years to the north of the island as there Branded Residences are large tracts of land available,” said Mr Barnett. Another trend in Phuket is the emergence of “Going forward we see a shift further to Phang branded residences that are sold but then Nga, such as Koh Palai near the Raffles site. managed by a five-star hospitality group. One of the impediments is the Phang Nga provincial government as there is legislation Raimon Land Director of Sales and Marketing, limiting hotel size to 79 keys within 300 Henri Young, said: “It is evident that brands metres of the ocean. are being used to sell property. “We also understand that there is pending “Certainly the security a brand offers is very legislation for the east of Phang Nga not to comforting and I think we will be seeing more have hotels in that area at all. So over the of it. Once the condominium is finished, on the last six months it looks as though all new service and management side, a brand can development is being pushed back to Phuket. add so much value to investors.” Jones Lang LaSalle Thailand Manag- ing Director, Suphin Mechuchep “Long-term people will look for new things C9 Hotelworks’ Mr Barnett added a word of “Phuket should be promoted as a gateway to con- nect to other cities in the Far East. This would help as there will be a tourism fatigue with Phuket caution that buyers should be wary that buying align the tourism industry with the supply and de- and they will see Khao Lak with 4,000 hotel into a branded residence would not necessarily mand requirements of the real estate industry.” rooms, Krabi and Phang Nga Island. But there mean the brand would stay involved in the Cont.P 12 11 Raimon Land Research ©2008
  12. 12. Phuket Forum “Phuket is not one destination, but should However, while this has not had a major be promoted as a gateway to connect to impact on the sale of units in urban areas, other cities in the Far East, such as Hanoi, such as Bangkok, sales of resort properties, Singapore, Hong Kong and cities in China. that are particularly sought after by overseas This would promote the sustainable growth of buyers looking for a second home purchase, the tourism industry which would align it with have been damaged. the supply and demand requirements of the real estate industry,” she said. Phuket Vice-Governor, Smith Palawatvichai, said local senators are currently lobbying the Mr Barnett added that he would to like to see government to grant Special Economic Zone the formulation of an official organisation, such status to Phuket on the grounds of its high tax as a Phuket Visitors Bureau, that promoted Phuket payments to the central government which abroad whether it is investment, real estate or are not matched by the 20% the government tourism. returns to develop the province’s economy. Phuket Real Estate Club President, Tanan Tanphaibul “With over 40,000 hotel rooms, 10,000 Phuket Real Estate Club President, Tanan “If Phuket is awarded Special Economic Zone sta- villas and over threee million visitors, we Tanphaibul, said this was the only way forward if tus, there is a strong chance the foreign quota for certainly need to have an organisation the island was to increase the foreign quota and projects will go up to 60% or 70%, which would be very good for local developers.” promoting Phuket abroad to keep generating maximise demand from overseas investors. these kind of investors,” he said. “It is under the surface at the moment but it is “If there is success in Phuket’s bid to be definitely boiling up and what it is going to awarded Special Economic Zone status, do is set up a two-tiered pricing structure on there is a strong chance the foreign quota for premium real estate.” projects will go up to 60% or 70%, which would be very good for local developers,” Mr C9 Hotelworks Managing Director, Bill Tanan said. Barnett, added that the overseas buyers contributed to the local economy, as they were Raimon Land’s Chief Executive Officer, Nigel predominantly end-users and not speculators. Cornick said the existing regulation was limiting international investment dollars flowing “They bring money into the economy, into Thailand and hoped the industry could put children in schools here, contribute to lobby for change. restaurants, to the service economy and international hospitals. It has been a very “Very few Thai investors buy real estate in healthy market here as there has been an Phuket. They would prefer to go to London and absence of people leveraging and buying on spend USD1 million,” he said. Raimon Land Director of Sales and speculation,” he said. Marketing, Henri Young “It is evident that brands are being used to sell “This is a problem for developers as I cannot property. Certainly the security a brand offers is But he added that since the Foreign Business guarantee more than 49% of the inventory in very comforting and I think we will be seeing more of it.” Act, Thai speculators had come into the lower any project being sold. end of the market. Special Economic “The difficulty for us is to optimise the returns on “Have a look at Patong, where there are investment with these restrictions in place. That Zone To Increase currently over 1,200 condominium units under means that foreigners who come along and construction or development. If you look at want to buy into one of our projects where take-up rates, you are looking at about 50 there is no foreign quota left will go down Foreign Quota units a month,” he said. the road to a possibly inferior development to buy. “These are fairly low yielding units, THB2 to THB6 million and the majority of the buyers One of the key issues hurting demand from “But that means that the developer will have are Thais. But from a market point of view it international investors is the restriction on the half of the project empty when his quota runs is not healthy as they are buying not as end- number of units that are available for foreigners out. So this is a negative, a real negative users, but multiple units on speculation. to buy, delegates to the forum said. for me because it is not really a free supply and demand equation. It is regulated by the “As a Special Economic Zone, it is meant to The rules and regulations in Thailand are government.” attract more foreign investment that can be very clear on this point, stating that overseas invested back into the economy. You need the investors can purchase only 49% percent Mr Cornick worried it would ultimately create end user here, not the speculators, who are of the saleable area of a condominium a two tier pricing system. contributing to Phuket itself.” development. 1 R a i m o n Land Research ©2008
  13. 13. Phuket Forum Officials Aware Of Property Industry’s Importance In a QA interview, Phuket Vice-Governor, Smith Palawatvichai, provides his views on the Governor’s office’s plans for the future of Phuket. What does the Phuket Governor’s of why we are a popular destination. When hotels in the world. This also helps present and office have planned for the long- visitors come and enjoy Phuket on holiday they excellent image of Thailand to the international term growth of Phuket and its also see that they can own their own villa or community as well. economy? condominium here at a fraction of the price The key issues positively impacting compared to other destinations around the We will continue to invest in infrastructure Phuket today and its future growth? world. Living in luxury in idyllic surroundings is projects for the betterment of Phuket and the a key selling point for Phuket and when tourists people that live there. We are well aware of see how easy it is to obtain their own piece The main issue we need to constantly be the benefits international investment brings to of paradise, the property industry will continue aware of and manage is accessibility. Our our island and we will continue to encourage to flourish. international airport provides wonderful this through the development of the property access to Phuket and it is crucial to our future industry and our tourism industry. Phuket will growth that we manage this facility to enable soon be home to some of the world’s most people to get here. We also need to ensure luxurious accommodation, condominiums and that Phuket remains accessible to property villas and we want to do everything we can developers and investors. It is a very open to enable the development of these sectors by playing field at the moment and we are keen reducing barriers and providing a platform for to see it remain that way. If we can provide industry and business to excel. an efficient gateway to Phuket and ensure regulations for property developers and How important is the property investors are open and transparent then Phuket market to Phuket and its economy? should continue to prosper and enable us to invest further in facilities for the betterment of In terms of putting Phuket on the map globally as everyone on the island. a destination where some of the finest property developments in the world can be found, the Why does tourism and lifestyle property industry holds huge importance to us. remain one of the key drivers for It brings in billions of baht into our economy the property market on Phuket? and of course brings many thousands of visitors Phuket Vice-Governor, Smith Palawat- to Phuket which provides fruitful employment to Phuket is the perfect place for tourism as we vichai our residents. The quality of the property being provide the ideal environment for a tropical “It is time for all partners of Phuket, whether it is constructed also puts Phuket on the world stage government, the private sector or overseas inves- holiday. We have an efficient airport and tors to join hands and develop the island as a as we can proudly say we are home to some some of the best hotels, spas and shopping in world-class destination. We need to build the of the finest condominiums, villas, houses and dream together.” Thailand. Our beaches remain the cornerstone 1 Raimon Land Research ©2008
  14. 14. Investor Profile Lifestyle Investment As an international investor looking for a lifestyle investment, Garry Daintry selected Raimon Land’s Kata Gardens development to live his dream of residing on Phuket. Mr Daintry recently sold his condominium for a handsome profit and shares his thoughts on the island. dining, beach and outdoor lifestyle aficionado Why do you consider Phuket a Prices for these types of condominiums in could want. It’s a fantastic lifestyle and anything good developments will surely increase over good investment? you want to do is easily accessible. Companies the long-term. However, keep an eye on currency who supply services are hard working, cheerful movements when it comes time to sell. When I wanted to buy a freehold condomini- and affordable. Living on Phuket can be very um on Phuket, Kata Gardens was very afford- comfortable and is much different to other How important is Phuket’s location able - as I did not have to borrow to buy it destinations around the world. In fact the life- for you and why? - and all of the advice I had received prior to style and the cost of living are two of its main buying indicated that this development would attractions. Probably one of the most important aspects increase in value. I can say that I found it to for me was the climate and the people of be a very rewarding investment upon selling Why did you select a Raimon Land Phuket. A great lifestyle amongst fantastic it, and I made around a 35% capital gain on development? people. It is also a very convenient destination my original investment. to access with many airlines servicing the island both locally and internationally. It is also a Raimon Land has a good reputation among What criteria did you use to select very easy place to get around most of the developers providing high-end condominiums this (Kata Gardens) investment? time with reasonably priced taxis and little and has very helpful staff on hand at all times congestion on the roads. to assist when help is required. It also selects I actually did not have too many criteria when excellent engineers and contractors to carry I was considering buying there, but the ones I What do you see as the lifestyle out its work and particularly goes to a lot of did have were important. I wanted to be in- advantages of being located in trouble to make sure the buildings are sound volved with a reputable developer that could Phuket? once handed over to the owners. Owners deliver a high standard of finished product are not left in the lurch and they are delivered and also good views on a good part of the Phuket has just about everything a shopping, the products they are promised. island. My friends assured me this would be the case with Kata Gardens and they were correct. Do you see luxury development values increasing in Phuket in the coming years? Why? There will probably be some hiccups in the short-term while the economy sorts itself out, not only in Thailand, but around the world. This investment in Kata Gardens was good because freehold ownership of a “foreign quota” condominium really appealed to me. 1 R a i m o n Land Research ©2008

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