Market Survey in Spring 1998
Julie Hume, the Content Manager for eThailand, a new web based
Thailand directory and information service wrote - "I noticed that
you conducted a Market Survey in Spring 1998 - have you done another
in 1999 "?
Well, no not yet, but it sounds like a good idea. The question eighteen months ago that inspired that review was "Turmoil in the stock, currency and property markets of Thailand and other South East Asian economies during the last seven months has been well publicized by the world press. How has this effected the property market in Phuket; is now a good time to be picking up a bargain"?
Well, those events are by now pretty much fading into peoples distant memories, but the changed conditions that they brought about remain little changed now almost two years later, so much of what I wrote last year still remains valid, although the market has naturally matured and settled a bit from those heady days. (I just know you have all kept your copies of the April 98 Gazette!! - but if you did not you can always read it here
What was significant then was that a strengthening foreign tourist market along with a weak Baht meant that many foreigners were starting to see Thai property as a bargain. That situation continues to this day, with no immediate expectations that those conditions are going to change significantly. The Wall Street Journal is to my knowledge currently researching an article on Asian (including Phuket) property exploring "the thesis is that the dollar is currently so strong, homes overseas are a good buy"
The marked contrast between Phuket (which due to its strong tourist sector boomed during in the general country wide bust of 1997), and the rest of the country still remain, but there are signs that slowly but surely the economy of the rest of the country is now getting back on its feet. And by the same token the differences between the health of Phuket property aimed at the foreign and tourist markets (this is predominantly found on the west coast) and the local housing market developments (predominantly located on the east side of the island) while a little improved, remains significant.
The increased volume of foreign buyers that rapidly pushed up Baht
prices (while dollar values were falling) of prime properties in late
97 and early 98, has carried on, but despite the continued strength
from foreign buyers, Baht prices have not risen much further. This is
largely explained by the number of new developments have been launched
to meet the increased demand.
In dollar terms Phuket resort and residential property still remains a relative bargain with dollar values still below those of the last market peak in 1990, so barring any significant recession in Western economies, the outlook for the sector remains positive.
The hottest selling properties are still the prime waterfront locations, and while it is clear that some new areas are and will continue to be opened up, the overall supply of such prime waterfront sites is fast diminishing and future price rises are imminent.
As widely expected two years ago the Baht flotation has had a significant impact on construction materials prices, with the result that new construction costs are now running 20 to 30% more in Baht terms than three years ago. Clearly this will soon start to have an impact on all property values as supplies of old stocks dwindle and more new construction commences.
High rise buildings (which under new zoning codes cant be built again) typically located a couple of hundred meters back from the beach and other near to beach (but not quite prime) low rise property where prices have as yet seen very little change in Baht value, suddenly start to look like attractive buys that must be next in line for increased demand and price rises. Local market housing in the center and the east of the island, is with a few exceptions, still significantly over supplied, so while prices remain very low in these areas (often below current construction costs) the potential for rise in value is still some years away.
While now relatively stable, the exchange rate will still remain a significant factor for many in the pricing and the determination of the best timing to purchase property. The Baht which had until a couple of weeks ago been holding steady for over one year in the 37 to the dollar range was weakening and nudging the 39 levels. That weakness should give another little boost to the resort residential property sector.