Knight Frank Thailand has released its highlights regarding investing in residential property in popular resort locations in Thailand, including Phuket, Hua Hin and Pattaya. The real estate firm noted how each market is characterised by different attributes, and demonstrates diverse buyer profiles.
“Investment in property in Thailand’s popular resort areas continues to attract interest from local and foreign buyers,” said Risinee Sarikaputra, Director, Research and Consultancy Department of Knight Frank Thailand.
“While activity has slowed, each of these markets has retained specific attributes that continue to drive sales and new project developments.”
Investing in Phuket Condominiums
The Phuket condominium market has transformed itself to accommodate the change in buyers’ preferences, as well as reflect the scarcity of land.
Before 2008 the condominium supply in Phuket tended to include larger sized units of more than 100 sqm. Some 84 percent of the entire supply was units larger than 70 sqm and only 16 percent were units smaller than 70 sqm.
From 2008 to 2014, 82 percent of the total supply included units smaller than 70 sqm, with 18 percent of units being larger than 70 sqm. Units smaller than 40 sqm could only be sold when they were priced below THB5 million.
This represented the shift in buyers’ intention from self-occupancy to pure investment purposes.
“For investing in Phuket condominiums, a good area would be the western coast of Phuket, from Mai Khao to Rawai beach. The compact, one-bedroom unit, has investment potential however, the two-bedroom seaview units, from 71 to 99 sqm would be an even better investment due to the scarcity of such units,” explained Risinee.
The CAGR of sea view unit in Phuket was 5.2% from 2007 to 2014.
Investing in Phuket Villas
“Phuket continues to attract its fair share of extremely wealthy foreigners and property investors, but the number of foreigners willing to spend THB100 million or more for a luxury villa has been dwindling,” she said.
This year Phuket has been attracting more mass-market travellers, notably Asian and Chinese nationals whose numbers help offset the drop in jetsetters. Villas were still selling, but the number was more modest, though still priced beyond the means of most buyers.
Previously, the demand on the island was for large lifestyle villas, with usable areas of at least 1,600 sqm and a selling price of THB100 million or more. But, lately, demand was highest for villas priced below THB20 million with 690 out of 950 available units sold in this price range, or 72.6 percent.
Most villas in this range have two- or three-bedrooms, with usable area of 200 sqm to 300 sqm located on small plots of land. The small, one-bedroom units, performed reasonably well but not to the extent of the more sizable counterparts.
The overall take-up rate for the entire market continued to improve – with 78.7 percent for the first three quarters of 2014.
The interesting location for investing in Phuket villas is along the western coast however; the areas with more complete facilities and amenities for daily living are in Bangtao and Patong, for example.
The Bangtao area was first developed with the Laguna project. In the time following the inception of Laguna, several high-end projects came followed recently by more mid-market developments and economy villa projects.
“The Laguna area remains a very sought after part of the island due to the range of facilities in the area and proximity to the airport. There are also international hotel branded villa projects, including Banyan Tree and Dusit,” said Risinee.
The selling price of villas managed by Banyan Tree was in the range of THB59 million to THB125 million per unit, whereas villas managed by Dusit were priced lower at around THB34 million per unit.
She added, “Ideally, though the villas do not have sea views, the distance to the beach should be short. The surrounding environment of the villa project should also be peaceful and tranquil.”
Investing in Hua Hin
The Hua Hin condominium market was previously popular among affluent Thai families from Bangkok, but recently, it has expanded to capture new demand from medium-income Thai buyers due to improvements in accessibility.
From 2013 to 2014, 71 percent of the supply included smaller studio and one-bedroom units, whereas the larger two- to three-bedroom units made up only 29 percent, representing a change from the market prior to 2013.
Risinee explained; “For investing in Hua Hin condominiums, w good area would be between Soi Hua Hin 1 to Soi Hua Hin 85, which only had 399 available units. The Khao Takiab area is also quite interesting, with around 606 units available for sale. However, most projects along that area were in low rise developments due to building code regulations.
‘Good units for investment are one- to two-bedroom units priced from THB3 million to THB5 million per unit. Knight Frank research has shown there are only 12 available condominiums in Hua Hin in this price range however you will not find the selling price of condominiums below THB80,000 per sqm – thus, the one-bedroom unit in this area will be comfortable with the unit size starting from 37 sqm.”
Sea view condominium units are interesting for investment as the average selling price of such units grew at a much faster rate. They are now 59 percent higher than the average selling price of non-sea view units.
During Q1 to Q3 2014, the average selling price of sea view condos broke through the THB100,000 per sqm barrier and topped THB130,932 (CARG of 6.6% since 2007).
The scarcity of beachfront land and concerns of oversupply of non-sea view condo units were said to be the causes of the divergence in price between two condominium types.
Investing in Pattaya Condominiums
Each location in Pattaya offers a different character.
For Jomtien Beach there are a lot of service amenities, such as restaurants, pubs and entertainment venues. It is a tourist destination, especially the early sois in Jomtien. The main buyers of condominiums in this area are mainly European and Russian nationals, purchasing units for second vacation homes or as an investment asset.
Condominiums with affordable selling prices (between THB40,000 per sqm to THB60,000 per sqm are situated away from the Jomtien coastline but remain in close proximity to the town area that offers substantial amenities. Buyers are mostly local Thai and Russians.
There are also some projects in Jomtien that attract mainly Thai buyers, either for vacation homes or as investments, or both; however, the location is by the end of Jomtien which is more peaceful and not considered to be a tourist area.
The Pattaya city area is more or less similar to the Jomtien area with full service facilities such as the Central Festival Pattaya shopping complex, restaurants and pubs. The area is quite busy, but it is convenient for tourists.
The Wongamat area, unlike Jomtien and Pattaya, offers a more peaceful and private residential zone with many condominiums featuring a beachfront and panoramic sea views of Pattaya harbour.
Condominium buyers’ characteristics are distinct. As the average price of condominiums in these areas is higher and the main buyers are wealthy Europeans, British and Americans, as well as Scandinavian travellers and retirees who usually buy property for a second or permanent post-retirement home. Only a few affluent Thai investors purchase units here for long-term rental investments, and even fewer who purchase for their personal living.
“In particular, Wongamat is known for prestigious projects in an expensive residential area. The two-bedroom type unit with sea view is a good seller for European buyers as most of them buy the units for either a permanent stay or as a family vacation residence,” said Risinee.
“Notable projects such as The Riviera Wongamat, Zire Wongamat and the Cloud Pratumnak enjoy robust sales and good developer reputations.”
When buying condominiums, investors should check the project developer to make sure that the project will be completed and delivered on time.
There are also some condominium projects in Pattaya that will suffer from global macro-economic issues, such as the Russian economic recession, especially if the majority of target buyers are Russians, the report concluded.
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
