That fabled magical imaginary character Mickey Mouse decided to pack up his bags and float down to Phuket a few weeks ago.
For those in the know, the cartoon character’s namesake is often used as a reference to the increasing number of bite-sized entry-level condominiums.
Indeed, it’s a small world and Thai listed real estate developer Sansiri was quick on the draw after selling out its island debut dCondo in just half a day. With 556 units and sized down under 30 square metres, the urban twinged project hit a raw nerve in the trade.
Prices, which start just a wee bit below the magic Bt1-million market, created a feeding frenzy with buyers. Both a strong local teaser campaign and reliance on the developers’ considerable database of brand loyal clients drove momentum.
Much has been written this year about the increasing domestication of the Phuket property market and the sweet spot of Bt2 million to Bt4 million. The price just went lower and expectations are now that an increasing number of projects will go into copycat mode.
In the past, Land and Houses, Supalai, Pruksa and a handful of local players have been content to play nicely and retain a relative sense of price integrity. Now, as in the tourism market, mass volume-based products are looking to reset the casting call.
It’s interesting to look at the parallel universe of the past decade in terms of the cyclical development in the foreign-dominated resort-grade real-estate sector. First came the end users, and next came the investors. A similar storyboard is playing out in the domestic segment.
What is worrying though is that the overseas phenomenon was a legion of cash buyers, foreigners who were unable to structure debt or obtain financing. They came, they bought and they paid the full transaction prices. Despite the global financial crisis and ensuing doldrums of flat trading conditions, generally pricing has held its course.
Enter Mickey Mouse and eager casino-inspired speculators leverage unit purchases at the drop of a hat, and in many cases look at buying not only one but a multitude of properties. They then sit back, after paying a minimal down payment, and flip flop before handover.
All of this, of course, works at the magic wave of the wand, but the underlying assumption is that market pricing and demand will increase by the time the project finishes.
Can Phuket sustain a market gone mad with low-cost Mickey Mouse flats that won’t necessarily have a large potential to be sold onto end users strikes at the heart of what lies on the horizon?
For now, Sansiri has already announced a second project will roll out early next year on the island. Without a doubt, a gold rush is on, buoyed by optimistic investor sentiment. Expectations are that Phuket is now seeing a shift towards an increasingly urban lifestyle offering as in say – Pattaya. Could this be two peas in a pod?
The challenge remains how to match the high, medium and Mickey so’s onto the same page without impacting the traditional luxury and upscale property offerings.