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Explore the evolving luxury villa market in Phuket & Samui, with insights on market trends, development challenges, and future prospects. Discover the impact of global economic factors and changing demographics on luxury property investments.
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AMCHAM LUXURY RESORT RESIDENTIAL MARKETS IN PHUKET AND SAMUI MACRO DRIVERS IN FORECAST UPDATING & TOURISM TRENDS 5th March, 2009
Development of new Phuket hotel properties remains strong, despite ongoing political issues in the country and international financial downturn.
Branded developments continue to enter the market, with additional product coming online. • Tight credit conditions may cause project delays and a slowing of sales pace • near-term. • Availability of prime land in traditional areas continues to shrink and Phuket development pushes North and East in search of the perfect ocean view. • Luxury villa supply strong with over 300 units priced over THB 65 million in the market limited but new supply is limited. • Luxury villa sector continues to outperform the market. • Global financial turmoil and Thai political worries have impacted 4Q 2008 villa sales and may also result in a slow start to 1H 2009. • For those with capital (purchasers, investors or developers), there will be opportunities to benefit from any temporary softening. • Our medium term outlook for Phuket’s luxury villa market remains positive.
Upcoming luxury supply includes some prestigious branded newcomers to Phuket. • Evolving tourism sectors introduce a new set of potential investors to the real estate market. • Infrastructure development continues to support high-end tourism and luxury residential projects. • As availability of prime land continues to shrink, boutique developments will become increasingly common. • The marina market continues to be a developing story in Phuket’s East.
Phuket is one of Asia’s premier destinations and is well regarded among villa purchasers. The market has shown steady growth in visitor arrivals and real estate values over the past decade and this is expected to continue over the upcoming decade as accessibility and hospitality offerings continue to improve.
Greater Phuket : • The lack of beach front real estate on Phuket itself as well as the availability of larger land parcels for high end resort development and large mixed use projects in Thai Muang, Natai Beach and Koh Kloy has resulted in a trend towards high end development and premium hotels in Southern Phang Nga. • Mai Khao: • As beachfront land has become scarce elsewhere on Phuket, Mai Khao has become an attractive proposition for developers. • East: • Developers seeking out new areas have also moved into locations such as Eastern Phuket. With high profile projects such as Jumeirah Private Island, Taj Exotica and The Yamu, the East Coast is a developing story in the Phuket property market.
The upper end of the luxury villa market has outperformed the Phuket property market as a whole, with many successful property launches. Looking forward, it is evident from the luxury villa pipeline that upcoming supply is expected to be limited in the next 12-24 months. This is due in part to global economic pressures, which are likely to result in the following supply effects: • Certain projects are being put on hold because: • a) Banks are withdrawing commitments to fund • b) Buyers are unable or unwilling to fulfill their obligations, • and/or • c) In some cases, certain developers may be under cash pressure. We may also see a slowdown in new project launches and development progress while liquidity remains tight.
In terms of demand, it is likely that we will see a softening in 2H 2008 luxury villa sales and a weak start to 1H 2009. This is mainly due to a ‘’wait and see ’’ attitude on the part of purchasers who may be affected by the global financial shakeout.
An interesting trend in Phuket is the change to the definition of “luxury villas”, both in terms of pricing and location.
Change In Demographics • Arrival Of The Super Tourists • Phuket Boating Market • Smaller Boutique Developments • Infrastructure Development Keeps Up • Community Consultation
Branded developments continue to enter the market, comprising the bulk of products coming online. • Increasingly limited availability of sizable parcels will restrict the number of large projects on the island in the coming years, with the pricing for the last remaining large, coastal parcels being bid up throughout Samui. • Availability of prime land in traditional areas continues to shrink and Samui development pushes southwards along the island’s western coast. • Tight credit conditions may cause project delays and a slowing of sales pace near- term. • Luxury villa developments supply stable with over 60 units priced over THB 65 million in the market but new supply in this price range is limited. • Global financial uncertainty is resulting in a sluggish property market. We expect demand to remain flat for the remainder of 2009. • For those with capital (purchasers, investors or developers), there are opportunities to benefit from market softening, with current projects offering negotiable pricing.
Samui’s strong push into the branded residential market may cement its reputation as a new luxury destination. • Changes to how the island is governed may bring about changes which could alleviate concerns about necessary infrastructure development and other local issues. • Evolving tourism sectors and widening access to the island introduce a new set of potential investors to the Samui real estate market.
The island of Samui is rapidly becoming one of the region’s most popular options for property investment. The past decade has brought major changes. Thai and international investors have funded an accelerated pace of development, building high-end residential product and upscale resorts, which have transformed the face of the island.
Taling Ngam: While developments have traditionally been clustered along the northern and eastern shores of Samui, the lack of prime sites has resulted in a shift towards the west of the island. Southern Samui: The south-western corner of Samui has been slow to develop, due to its distance from tourist areas and the airport, however it has gathered momentum in recent years with several high-end projects either underway or rumored. Koh Phangan: As Samui develops apace and land prices rise further, attention is focusing on neighboring island, Koh Phangan, which remains a relative bargain in comparison.
The luxury segment in Samui is a relatively recent phenomenon, with a small number of branded developments and high end boutique developments being released in recent years. • The upper end of the market comprises a relatively small percentage of the overall market in Samui, which is currently dominated by low to mid range residential products.
We are seeing a weak start to the year and expect lower levels of demand to persist throughout 2009. This is mainly due to a decrease in confidence and liquidity among potential purchasers as a result of tough global financial conditions.
When compared to Phuket, the Samui real estate market is still in its infancy but it is rapidly catching up in terms of product variety and robust pricing levels.
Change In Demographics • Smaller Boutique Developments • Infrastructure • Local Power Shifts • Samui Marinas • Green Island Project
To sum up 2009 in one word… Challenging!