Phuket’s re-sale market shows value

PHUKET: Most re-sale properties in Phuket are priced lower than comparable new developments, a trend clearly highlighted in the data accumulated in Siam Real Estate’s 2014 Phuket Residential Market Report.

In Phuket and the rest of Thailand, most buyers prefer brand-new properties. There are many reasons for this: new properties have never been lived in; they offer the latest in terms of building materials and quality; and property developers offer extended payment terms during construction with special introductory terms for buying off-plan, resulting in a higher capital appreciation.

Also, buyers looking for a property as an investment can enjoy an average annual rental return of 5-7%. Typically, capital appreciation when buying during the pre-sale period is 30%, and 5-10% when buying during the construction phase.

However, sellers of re-sale property competing with the demand for new property are able to offer attractive price discounts, which has led to Phuket’s re-sale market staring to offer better value.

The charts above clearly show that re-sale properties are currently priced at a discount to new developments. These results are based on more than 4,500 property listings on offer in Phuket.

Specifically, condominium prices have been broken down into price per square meter and houses by number of bedrooms, the results are an average for all locations in Phuket. The evidence is clear: the discounts are there for all to see.

One of the key reasons sellers are able to offer discounts on resale property is capital appreciation.

Foreign buyers in Phuket who bought their properties five or more years ago have since seen the baht appreciate strongly against their home currencies – specifically, the baht has appreciated more than 20% against US dollars, euros and pounds over the past five years.

Therefore, a lot of foreigners who want to sell their properties can do so at much lower prices than the true market values of the properties. When these sellers repatriate their money, they gain on the exchange rate.

Adding to this is the fact that construction costs, including materials and labor, in Phuket have increased significantly in the past 10 years. Hence, buyers who bought units five to 10 years ago can offer lower prices than comparable new developments and still make attractive capital gains.

Last, but certainly not least, is that land prices have increased dramatically over the past five years. In some locations, prices have doubled.

This increase in land prices is adding to the cost of new developments, as developers have to pay higher prices to buy land plots on which to build.

As the re-sale market in Phuket continues to mature, re-sale prices can be expected to align with the prices of new developments. When the availability of suitable green-field sites for new developments in Phuket becomes scarce, the re-sale market will begin to mature as demand for re-sale properties increases.

For more information about this article contact Mr Hodges, the North Branch and Investments Manager for Siam Real Estate in Phuket and author of SRE’s Phuket Residential Market Research Report. He has more than six years’ experience in Phuket’s real estate market. Tel: 076-324042 Email: kevin@siamrealestate.com; www.siamrealestate.com.

— Kevin Hodges