Phuket’s luxury villa market holding despite global conditions

PHUKET: The upscale luxury villa segment has outperformed the broader Phuket property market for Q4 2008 in spite of the worsening global financial downturn and recent political issues in Bangkok, according to the Phuket Luxury Villa Market Report recently released by the island’s widely respected consulting firm C9 Hotelworks.

C9’s Managing Director Bill Barnett said that “while take-up rates are expected to soften for 2009 with the ‘wait and see’ attitude of buyers, supply and demand still remains favorable.”

Key fundamentals at play in the market are the absence of purchaser debt which has stabilised capital values, a slowdown in new product launches that will build marketplace traction while the availability of premium land continues to shrink, thus creating substantial barriers to entry. One emerging benefit of the crisis is the sharp reduction in construction costs in the region by 20-30%, although this is being offset by limited availability of developer debt in the Thai financial markets.”

According to C9’s report, a total of 304 properties priced from 65 million baht (USD 2 million) and above, and located within estate developments, were for sale at the close of 2008 with projected increases to see this number rise to 367 moving into 2009 and beyond.

“Given the limited market size, re-sales of existing units will become more predominant as buyers shy away from taking development risk on off-plan purchases,” Mr Barnett added.

Geographical diversification is another key trend. Limited prime oceanfront land within the traditional West Coast areas is pushing development into southern Phang Nga province (just over the Sarasin bridge), Phang Nga Bay, and into the East Coast of Phuket Island. Hotel developments in these areas are rapidly influencing buyer sentiment on the back of international brands such as Jumeirah, Taj and the design team of Philippe Starck/Jean Michel Gathy’s luxury development ‘The Yamu’.

Based on overall pricing parity comparisons, Barnett, who is also a widely read Phuket Gazette columnist, says the resort island’s East Coast has now edged ahead with an average of 128.2 million baht, versus the West Coast at 127.1 million baht, for units currently on sale.

For a map of Phuket’s new luxury villa projects, click here.