Property Watch: Seeing through Phuket property transience
PHUKET: There are many themes of life in Phuket that are either interwoven or operate independently. It is possible, as many local Phuketians will testify, to exist in Phuket without even meeting your friends on a regular basis because you live on ‘different sides of the island’, or ‘don’t like driving over the hill’, or because of the traffic jams.
In terms of property, infrastructure and amenity development, the Phuket transience can also rub off on behavior and business. This requires a lot of adaptation and many newcomers to Phuket and the property market can be taken by surprise by some of the more unusual practices and experiences they might encounter during an investment.
One big issue with transience is maintaining your property, but also watching the costs and being part of a committee or group of owners that oversee the property. If you are never here, your voice will often count for little, and you will be at the whim of the most permanent resident’s voice and actions.
When it comes to use of your property and rentals, unless you happen to have a lot of spare time, you will have to work out a good way to compete in a market where there is now a lot of property for rent. In many developments selling real estate, the first few years of post-purchase is backed by a rental program return, sometimes guaranteed at a fixed rate. However, when that first period is over, you will be subject to the very lengthy monsoon season, with the bursts of monsoon even in the mostly-dry high season.
Therefore, your property will be rented out amid a lot of resort-style property that may be part of a hotel operation and have far more resources than you do in terms of marketing. This will challenge your potential to generate rental revenue, and it is a significant factor in choosing your property – how can it make enough money over the high season to make up for the long low season, and what will that look like in terms of expenses over a year, which will fluctuate a lot less than the rental revenue.
In terms of reliance upon business people, their stability can be compromised by transient behavior and this can affect your business dealings and property investments. If your seller is leaving Phuket post-sale, or your agent is only going to be an agent now and again, floating in and out of Phuket and other places according to the closest commission payment, then if you have any complaints that need to be addressed or post-purchase care requirements, these are not likely to be addressed.
In a stable, non-transient environment, there is naturally more accountability, and an element of self-regulated behavior based on a desire to preserve a good reputation over extended periods of time.
Phuket, with all its benefits, can therefore be disorienting for newcomers – even those possessing good business acumen and good standing – with its ‘temporary friends’, some fly-by-night businesses and companies, and, fortunately, with a healthy mix of established families and businesses that have a track record of success and investment dating back even before roads were installed in the province.
In order to get the most out of a short or long-term investment in property in Phuket, I recommend that a careful analysis of the elements of your investment that are, or could be, transient be conducted. This will help distinguish between a short-term promise, a temporary truth, and a fact that applies now and will apply in the future.
It can be difficult in Phuket to see past what can sometimes be a facade or presentation of success and prosperity, when the truth in most business environments and property markets, unless you are a committed gambling sort, is that appearances aren’t everything. Permanence, stability, certainty, substance, ‘long-termism’, planning and reputation will impact heavily on the success or otherwise of your investment.
— Desmond Hughes
