Foreign demand rises for luxury condos in Phuket

While buyers from the United Kingdom, the United States and Scandinavian nations continued to generate most of the demand, the base was expanded by increased interest among buyers from Russia and Asia, especially the Middle East, reports the latest study by Jones Lang LaSalle, a professional-services firm specialising in real estate.

Jones Lang LaSalle recently conducted a study of the high-end and luxury condominium market in Phuket, covering units priced at Bt92,000 to Bt128,000 per square metre. The study focused on sales activity during the high tourism season between November and March.

Findings from the study show the supply of high-end and luxury condominiums increased 13 per cent to just over 700 during the high season. Projects being marketed within the high-end and luxury segment 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 12 and as many as 100 units under master plans. Out of the marketed units, about 56 per cent were sold by the end of the season, with foreign buyers generating most purchases.

"Unlike the urban centre of Bangkok, where Thais represent a substantial portion of demand in most condominium projects, the resort market of Phuket attracts primarily foreign buyers who want condominium units on both freehold and leasehold terms," said Dan Tantisunthorn, head of research at Jones Lang LaSalle (Thailand).

"While traditionally the bulk of these foreigners would be British, US or Scandinavian nationals, affluent individuals from China, Russia, India, South Korea and Middle East countries are representing a growing source of demand. This trend reflects growth in the number of tourists from these markets."

About 73 per cent of the units sold were located in western Phuket, well above the proportion that the area accounted for in terms of supply (about 63 per cent). During the same time, prices per square metre in this area rose 5.8 per cent on average from before the high season.

Eastern Phuket also showed longer-term potential as a high-end and luxury location, and average prices rose the most across the island, more than 20 per cent since the onset of Phuket's high season.

Beyond location and price, Jones Lang LaSalle's study also provides an analysis on a number of key factors that attract demand across Phuket's high-end and luxury condominium market. The analysis reveals different levels of influence that these factors have on demand.

Although virtually every condominium in this segment offers sea views, only 51 per cent of the units are in projects located on beachfronts, given the lack of sites for development. The average sales rate for beachfront units is roughly 58 per cent, slightly above the average of 56 per cent for all units.

While some projects will provide an estimated yield, only 11 per cent 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 per cent of the units guaranteeing a yield have been sold.

More than 63 per cent of the units offered by developers committed to engaging international property-management firms have been sold. These units also commanded a 4.4-per-cent premium on price per square metre over the market average.

"While many buyers want to ensure that their condominiums will be managed to international standards, a number of foreign buyers feel more comfortable having property-management brands they are familiar with in their countries of origin manage their property in Thailand," Dan said.

"The growing reputation of Phuket as one of the world's top resort destinations will continue to attract buyers from around the world looking for a holiday or retirement home abroad."