Thailand remains the most popular destination for real estate buyers in Southeast Asia. After a long break we can come here again. How will Phuket meet us? What is the market situation? How have prices changed?
As soon as possible, foreigners came to us even if they had to stay in a hotel room for two weeks.
Phuket was the first to open for vaccinated travelers. And from January 11, 2022, the number of provinces was increased to four. Phuket was joined by Krabi, Phang Nga, Surat Thani and Chonburi regions under the Sandbox program.
This is a program for fully vaccinated foreign tourists visiting special zones of Thailand (“sandboxes”) approved for tourism without quarantine. The main condition – tourists must have an entry document Thailand Pass QR-code, a certificate of vaccination (of Russian vaccines accepted “Sputnik V”), a negative PCR test for Covid-19, issued no more than 72 hours before departure. Also require insurance policy with at least $50,000 coverage, confirmation of hotel reservation and payment for at least seven nights, prepaid two PCR tests.
The first test is taken upon arrival, and after a negative result, you can leave the hotel and move within the sandbox area. At the end of the seven nights and with a second negative PCR test result, those wishing to travel to any available region of Thailand may do so.
According to Oldypak Capital LP report, despite the lockdown, Thailand’s real estate market was working. There were sales in the resort real estate segment, but not in the volumes of 2019.
In our experience, in 2020 and 2021, more than 70% of the transactions are contracts made by those who know the island, have already invested with us and have now decided to increase their position in the market. The remainder are new clients, and mostly large investors who bought in packages (20-30 apartments each).
Another interesting observation. Previously, out of ten applications that came to us, nine investors pursued an investment goal. Only one was buying for himself. Now the share of the latter has increased. Many want to move to Thailand – if not to live, then at least to be here most of the year.
Hence the next trend. Most are looking for apartments of larger size. By the way, such apartments are very liquid. They are not built as actively as studios, and they are easily resold. Plus, people buy such an apartment not only to rent out, but also for everyday life.
It does not matter what the purpose of the investor. Real estate – whether it is an apartment for your own residence, or an object in the hotel project – should always be liquid.
Here are a few criteria for liquidity of real estate in Thailand, which you should pay attention to.
Location of the complex – the coast (west or east), the distance from the sea.
The nearby infrastructure (stores, schools, beach clubs), which in each area is different and on the level and style.
Residential complex (class housing and compliance with the location) and its internal infrastructure.
The apartment itself – the floor plan, layout, view from the window.
The price. Here is an example. What to choose: an unmarketable apartment in a complex near the sea for $109,000, which is 30% lower than the average market price in the seaside housing segment, or an apartment in the same complex, with the same floor area, but with a view to the sea and for $180,000? The second option just illiquid – too much for him to ask.
The most budget options in Phuket in 2022 – from $ 110 thousand for that money you can buy a studio to 35 square meters. m with full furnishings to hotel standards, located in a top tourist location and in a quality complex. A good investment option.
Note: In some locations of the world recorded an inadequate increase in prices. When these bubbles burst, a lot of investors will suffer.
In Thailand, it seems to me, the market is developing more honestly and adequately than in the rest of the world. We have no bubbles, real estate in Phuket is really worth less than the market price of hotel and resort real estate in other resorts. Even in Sochi, the resort facilities are more expensive. In Phuket the past two years, no one raised the price. Even though the cost of building materials has increased.
Developers, whose projects initially had good margins, were able to curb the rise in real estate prices. Not all developers had it. So now I do not recommend entering into off-plan projects.
And, of course, you have to take into account developers’ promises, especially with regard to profitability. Their words should be realistic. I think the promise of 10% per annum in a market that is just beginning to recover is overstated.
What can an investor buy on the market today?
- Lodging in a hotel complex – the best option for those who plan to either receive a passive income, or to live for a couple of months, and rent out the rest of the time. In this case, the operator provides the occupancy of the object in any season, but takes a portion of the profit. For the investor this is the most reliable option. And most likely the most profitable.
- Resident complexes without a hotel license. The apartments in them may be rented through an agent or management company, but the minimum term is one month. In the case of independent management all the risks and expenses are your responsibility as the owner.
According to Oldypak Capital LP report, only the apartments having a hotel license may be rented out. As a rule it is owned by the apartment complexes, located in the resort areas, built with the consideration of all hotel standards. Accordingly, the whole pool of residential buildings, i.e. the complexes which do not have hotel license, is excluded from the selection for the investors wishing to receive maximum income.
3. Shared-use complexes are hotels that provide an exit option from the rental program. Such projects provide more opportunities for owners. So, after exiting the program, the owners can live in the complex or rent out their residential property on their own. Or sell it to someone who doesn’t want to rent it out, which is a large segment of buyers.