Southern Asian, Arabic visitors lift Phuket rental market

PHUKET: Although a plunge in the number of Russian visitors hit Phuket’s rental market hard this high season, the unsettling gap narrowed slightly through a small increase in Southern Asian and Arabic travellers, said Dexter Norville, Jones Lang LaSalle’s director for Thailand.

This rental market is made up of the usual crowd of Europeans, Australians and Russians, but
now more Indian and Arab holidaymakers are renting condominiums, apartments and villas on the
island. Meanwhile, Chinese tourists continue to prefer staying in hotels.

“The Chinese market is definitely getting more adventurous. I mean, they still come on package tours, but you see a lot more independent travellers now,” said Mr Norville.

Latest research by the JLL Hotels & Hospitality Group notes that while international arrivals to Phuket grew by 25.8% to 3.2 million and domestic arrivals rose by 10.8% to 2.5 million in 2013 compared to the previous year, visitor arrivals at Phuket International Airport dropped by 0.6% during the first 11 months of 2014 as a result of the military coup in May that year.

However, a very bright future lies ahead, as the research states that once the airport expansion is completed, passenger capacity will jump to 12.5 million a year from the current total of 6.5 million.

Mr Norville cautiously advised those considering investing in a Phuket property for rental return, that demand remains on the beaches, not in the center of town. Among the beaches he recommends is Bang Tao.

“Surin runs into Bang Tao, so the Bang Tao and the Laguna areas are a good bet [now]. I believe it’s a good bet for the future as well,” he said.

“Karon and Kata are very well established, but there are definitely hotels occupying the prime space in those areas. That sets the actual achieved rent for such properties in those locations.

“Patong is the party town of Phuket and is basically dominated by hotels.”

Looking across the bridge to Phang Nga’s Na Tai and Khao Lak beaches, Mr Norville says that they are hotel-dominated areas, and because of the infrastructure, should remain so for a long time.

“Will stand-alone [villas] or a group of villa developments have demand for rent? Not when you have got JW Marriott and things like that close by,” he said.

Mr Norville added that while good villas can be rented out in Phuket and surrounding areas, the market is thin and the majority of properties are owner used.

“In the years to come, things might change, you never know,” he said.

While location is accepted as being the most important factor in investing in a property, another important aspect is having a good perspective of the market.

Unfortunately, this is not usually the case for most investors, and Mr Norville knows all too well that property owners often do not understand where the supply for the rental properties is coming from, what the actual requirements are and how to hit a sensible pricing point.

“If you own a property and you want to entrust somebody to do the rental, you have got to appoint one of the big boys,” he said.

— Nina Suebsukcharoen