Updated trends in Phuket’s rental property market
Given the backdrop of a booming Phuket real estate sector, one area that is often overlooked is the rental market. Despite a vibrant vacation short-stay segment, there remains a strong demand for extended and long-stay rentals across the island.
Rental demand coming out of the COVID-19 pandemic experienced a sustained uplift and has continued to perform well. Despite a return to seasonality for Phuket’s tourism sector, rentals have continued to post year-round gains.
Rather than simply asking what real estate brokers thought about rentals I took an opportunity to sit down with Brennan Campbell, Head of Brokerage at Thailand’s leading property portal FazWaz.com. Digging through data was the way to go and the idea was to look at full-year figures from 2023 and year-to-date 2024 to look for trends and changes. The figures may surprise you and no doubt give more insight into actual demonstrated demand.
Starting at the top and looking at the most popular real estate class for rentals, condominiums hold nearly 60% share, while detached houses in estates or projects make up over 20% share. Townhouses and stand-alone homes are both under the 10% marker. Comparing 2023 vs. 2024 condominiums are continuing to show growth.
Diving into specific condominium configurations in terms of popularity, one-bedroom units hit a share of over 40%, followed by two bedrooms at 20% and studios at a similar number. Tracking year-over-year trends, smaller units that are lower priced are becoming more popular and there is a trading down of unit size due to pressure on prices.
On the house front, three-bedroom units stood at 55% demand in 2023 but became less attractive this year. In 2024, a quarter of rentals were our-bedroom homes.
Looking at the nationality of renters Russia tallied nearly one-third of the market in 2023, but this year has shifted downward to just 25%. Moving through the Top 5 sources of business are Thailand, the US, the UK, and Australia.
Moving to submarkets, last year and this year have seen significant changes, though it’s important to note that 2024 is not full-year data. In 2023, the Top 5 submarkets were Cherngtalay, Patong, Kamala, and Srisoontorn (inland). Kathu, Rawai, and Chalong also ranked well.
In 2024, Cherngtalay is at the top but again this is Q1 data and there is the winter snowbird effect. Rounding out the Top 5 submarkets are Kamala, Rawai, and Patong/Kathu.
Rental tenure was a changing landscape last year and in 2024. In 2023, the average term was just over 10 months while this year has slightly reduced to just over 9 months. Three-six-month terms are popular but not nearly as strong as yearly rentals which account for over half of the demand.
One surprising trend when reviewing 2023 rentals is that there for extended and long-stay terms, demand remains consistent throughout the year. There are not the same seasonal spikes as in tourism, but looking closer at peak season it appears renters are less inclined to enter into rentals, no doubt as a result of the high prices of vacation rentals.
Tagging onto this is average market-wide rentals with a median monthly rental last year being THB68,000, and a similar number this year. This is an island-wide average and is for the overall condominium and house segments.
For buyers of Phuket property, taking a view on recurring yields is a good alternative to focusing on ‘the big flip’ of market appreciation. Real estate can be a wise long-term investment but removing as much risk at the acquisition stage is important.
The best advice is for buyers to do their homework and identify what are the most popular rental configurations, submarkets, and projects. Online sites now offer good historical data on rentals but this is just one element of buyer due diligence. Work through the numbers, and understand the difference between gross and net rentals, as often common area or maintenance fees are not factored in. Anticipate and plan longer-term maintenance expenditures, especially for houses and villas, these are capital-heavy investments and Phuket’s tropical weather takes its toll.
We do expect more ‘build to rent‘property developments in Phuket in the coming years, though a key deterrent is underlying land costs that are skyrocketing. In the serviced apartment sector, we have seen HOMA with two open properties and a third coming in Chalong take a view on sustainable cash flow from rentals. As the island’s real estate story continues to mature and fragment, rentals remain an ongoing evolving storyline.
Opinion
