Samui vs. Phuket
Neil a 29 year old Quantity Surveyor from Ireland and regular Gazette Property reader, wrote "I was recently on holidays in Koh Samui and fell in love with the place. I noticed that the island seemed underdeveloped in some areas and on inquiring found that property was quite cheap (by Irish standards). It also seemed to be cheaper than Phuket for similar properties and there seemed to be a lot of construction activity and land for sale. In your opinion, would it be a good time to invest in a small villa in Koh Samui or have prices there already increased a lot over the last few years? If so are there other areas in Thailand which would represent a better investment?"
Samui, not unlike Phuket or for that matter the less developed but equally fast growing areas such as Krabi and Khao Lak, has seen a lot of growth in recent years. Growth that has been stimulated initially by a growing tourist industry and is of late starting to see a fledgling growth in sales of second homes to overseas buyers.
Development in all these areas has (or is potentially following) a similar general trend. A trend that starts with the discovery of the locations by back pack tourists and the development of simple budget bungalows. Later as transportation links improve, bigger hotels follow, and then as the destination takes on a recognized tourist status with international brand hotel chains, the development of an industry in weekend homes and resort managed apartments follows. As the location grows from tropical beach resort to fully serviced community (with international standard hospitals, schools, shopping, communications etc) longer term foreign residence becomes feasible and residential investors (retirees, regional managers, small business owners etc) start building more substantial and permanent homes.
This development growth has typically gone hand in hand with rising land prices and rental returns. There are many points at which a good investment can be made in that development curve starting with raw land in yet to be discovered locations, to the most up market villas on Phuket coastline where a diminishing land supply keeps the pressure on prices.
Within the long term macro trend of generous sustained growth in the tourist resorts of South Thailand, there are several micro areas that have significantly varied from the general trend. Values in west coast Phuket typically outstrip east coast Phuket (while in Samui the reverse is true), ocean view land outperforms viewless land and commercial property values in Patong (long the most expensive in the region) continue to outgrow Karon.
As such I believe that it is almost impossible to qualify a good investment on such a broad general areas as say Phuket, Samui, or Khao Lak. Some parts of Samui (which as you note is generally less expensive than Phuket) are far more developed and have higher values than many parts of Phuket - though that does not necessarily make either better or worse investments.
When choosing an area to invest in, look closely at the details. Despite the fairly easy to read general trend that I described for Phuket, Samui, and Khao Lak, all have significant geophysical, transportation, cultural and historical differences. What makes this area cheaper than the next? What are the circumstances that would allow place A to develop in the same way as place B, what is the likelihood of that happening or not?. Am I investing for the short term or the long term?. And last, but perhaps most significantly in an investment in an overseas resort property, what personal use and personal value am I going to get out of this investment. Does what makes the place appealing as a vacation destination today give me what I will want from it as it becomes a semi permanent home?