Thailand’s monsoon baht debacle lights fire to Phuket real estate sector

C9 Hotelwork

As Thailand’s monsoon season continues with what seems to be an endless line-up of thunderstorms and massive rain showers, the real story in Thai real estate is the baht.

The Thai currency is precariously sitting at a 16-year low against the US dollar and has depreciated by nearly twelve per cent this year. As the exchange rate hovers near the 38 baht to the dollar marker, the best the market can say is, to expect continued volatility. In other words, it may very well get worse.

Heading down South to the resort-driven real estate sector in Phuket, the mounting global economic and political turmoil has somehow created a sense of calm in the eye of the storm. Tourism, the leading economic indicator, has partially rebounded with broad hotel occupancies in the fifty per cent range. More importantly, airlift is on a recovery trajectory as direct international flights are returning, spurred by the upcoming winter schedules in October.

What is perhaps the more notable storyline though is Phuket’s rapid real estate trajectory which has seen an influx of foreign buyers. Winding back to the two-year pandemic era and main market movers were wealthy Thai villas buyers snapping up the stock of luxury properties as second or holiday homes. The period also witnessed an inflow of expatriates from Hong Kong, Singapore, and even from as far away as North America, with the focus being on longer-term property rentals.

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Over the past six months, as both Asia and the world have experienced a constant stream of countries reopening to travel, with the latest change of rules in Japan and Hong Kong, real estate on the resort island has gone into high gear.

Looking inside the numbers and analysis by C9 Hotelworks market research, key buyer segments that are leading the pack are end-user buyers who are looking to relocate to Phuket in an unclear worldwide political and economic environment, high-net-worth individuals and family offices snapping up properties amid growing portfolios and a vibrant luxury and upscale rental market, with demand outpacing supply.

Speaking to leading Thailand online property marketplace Chief Executive Officer Brennan Campbell of FazWaz says “the current transaction activity has become a feeding frenzy. Month-to-month trading levels are rising faster than the floodwaters in Northeast Thailand.

And continues with “eyeing the remainder of the year and into 2023, the eventual reopening of Mainland China is expected to supercharge the sector and trends across a broader spectrum that will include institutional and private investors, lifestyle seekers, and families looking to relocate. The latter continues to be driven by a growing number of new international schools under development and ongoing fragmentation into micro-communities across Phuket.”

As we move into the final quarter of 2022, conversations on the ground with island brokers are punctuated on how the ongoing Thai baht exchange rate differential is creating a call to action for buyers and creating more competitive deal tension in transactions. While for sellers, exchange rate mitigation of currency risk has been pushed to the back of the deals given hyper-growth in market prices for their properties.

In the latter months of the year, the annual rainy season will gradually diminish and thunder clouds clear, but for Phuket’s real estate market, the rising migration to the island is expected to continue as property buyers and investors look to shelter in the mounting global storm of uncertainty.

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Bill Barnett

Bill Barnett has over 30 years of experience in the Asian hospitality and property markets. He is considered to be a leading authority on real estate trends across Asia, and has sat at almost every seat around the hospitality and real estate table. Bill promotes industry insight through regular conference speaking engagements and is continually gathering market intelligence. Over the past few years he has released four books on Asian property topics.

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