Long road to recovery for Phuket property sector

The Vice-President of the Phuket Real Estate Association says there will be no quick bounce-back for the island’s property market, saying it will take at least 2 years for things to recover from the devastating effects of Covid-19.

Speaking to Bangkok Post, Boon Yongsakul, owner of Boat Lagoon, says the fall-out has been particularly severe in Phuket because the province relies so heavily on tourism. And, for now, there are no tourists on the island except for a few interprovincial Thai tourists. The island’s airport was closed to all traffic on April 3 and has remained closed ever since.

Mr. Boon points out that 70-80% of the province’s economy has traditionally been driven by tourism, leading to Phuket taking a much heavier hit than many other parts of the country. He suggests that one way the government might prevent this happening again would be to shift the focus away from tourism and rebrand Phuket as a medical and educational destination. The island already already had an evolved medical tourism industry and has many international schools serving the local hi-so and expat market.

“Since I have been in the property business, I’ve never experienced anything worse than this crisis. Even Sars, avian flu and the tsunami were incomparable with the coronavirus.”

With the tourism industry currently decimated, financial institutions are more wary about granting credit to those who work in the sector and the number of people being rejected for mortgage approval is rising. Foreign buyers and sellers face additional hurdles of a travel ban and the strong Thai baht. It all adds up to a very tough year ahead for property developers on the island.

“It is a very challenging year for developers in Phuket. They should monitor financial liquidity. Some of them have shifted to smaller projects with less than 10 units a site.”

Mr. Boon anticipates that any recovery will be driven initially by expat buyers from places like Singapore and Hong Kong, many of whom may wish to move because of the high cost of living in the former and the current political unrest in the latter. He believes extending the current leasehold period from 30 to 50 years will provide an additional incentive for buyers looking for a secure investment (this has been touted by many over the past 2 decades without any changes).

SOURCE: Bangkok Post