Phuket News / Daily Updates from Paradise

Through the high tourism season, Phuket market for new condominiums in the high-end and luxury segments was robust based on historical data and recent surveys. While the performances of individual projects across the islands were varied, certain trends were more evident based on activity and characteristics within the market during the high season of 2007-2008.
An emerging trend is the good take up rate experienced by grade A high end and luxury condominium projects despite a more competitive market due to increasing supply. Features that contribute to the success of a few condominium developments include good location, ocean views, closeness to beach, good design layout, larger floor areas and high ceiling heights, privacy attributes, quality kitchen and sanitary ware, ample facilities, provision of additional services, developer’s reputation with strong financial backing, availability of end financing, investment return guarantees, etc.

Over the high season, the supply of high-end and luxury condominiums increased by 13 percent in terms of the number of units being marketed, to just over 700. The rise in supply was attributable to a single new project, as well as new phases of previously marketed projects being launched. Projects being marketed within these segments are typically small in scale relative to the broader market, with an average of 38 units per development or phase. Individual projects offer as few as twelve and as many as 100 units under master plans.

While these projects offer a range of layouts, from studios to large penthouse units, the highest proportion is for two bedroom units. Unit sizes range from less than 50sqm for a one bedroom unit to more than 800 sqm for a penthouse flat. The most prevalent two-bedroom unit, accounting for 30 percent of units, is 145-161sqm in size on average.

The resort market of Phuket attracts primarily foreign buyers, who are availed condominium units on both freehold and leasehold terms. While traditionally the bulk of these foreigners would be British, American or Scandinavian nationals, affluent individuals from China, Russia, the Commonwealth of Independent States, India, South Korea and the Middle Eastern countries are representing a growing source of demand. This trend is reflective of the growth in the numbers of tourists from these markets.

The high end and luxury segment of the Phuket condominium market is seen to be robust for the rest of the year. Demand and selling prices could see an upsurge should there be more positive land ownership policies coming from the Thai government. However, good high end and luxury condominium projects will continue to be in demand in Phuket if they are perceived to be grade A by investors.

From Jones Lang LaSalle’s research, another significant trend is of late we are also seeing buyers are now becoming more demanding compared to a few years ago. They are now more interested in projects that offer an obvious “product differentiation”.

Pricing for the high end and luxury segments is robust and now fetching 150,000 baht per square meter for off-plan developer’s condominium units such as in the Andara Residences while the Palm Beach Club is now asking 160,000 baht for re-sale units even though the project is yet to be completed.  About 73 percent of the units sold were located in Phuket’s west region, well above the proportion the area accounted for in terms of supply (approximately 63 percent). During the same time prices per square meter in this area rose on average by 5.8 percent from prior to the high season. A greater share of sales in the north region relative to the proportion of supply could be indicative of the lower average selling prices than those being offered prior to the high season finding demand. However, decreasing prices in the south of Phuket failed to generate any new sales during the period.

With sales in the area falling slightly behind pace in relation to its proportion of the island’s marketed supply, the east region showed longer term potential as a high end and luxury location for the island, and average price rose the most across the island, by over 20 percent since prior to the onset of Phuket’s high season.

Beyond location and price, several key factors appear to attract demand across this sector. Although virtually every condominium in Phuket’s marketed high and luxury segment offers sea views, given the lack of developable sites, only 51 percent of the units are in projects located on beachfronts. The sales rate for these beachfront units is only slightly above the average for all units at roughly 58 percent. While some projects will provide estimated yield, only 11 percent of the units in this segment are sold with a guaranteed yield. Furthermore, a guaranteed yield has not necessarily translated into strong sales, as less than 18 percent of the units guaranteeing a yield had been sold.

On the other hand, more than 63 percent of the units offered by developers committed to engaging international property management firms, such as Jones Lang LaSalle, had been sold. These units also commanded a 4.4 percent premium on price per square meter over the market average.

Article by Phuket Post – phuket-post.com