An aerial view of the Laguna
Phuket Resort: a project that proved
to be a catalyst for the now booming property market on the island.
(Photo courtesy Laguna Phuket)
David Simister
The Laguna Phuket project, launched in 1990, not only transformed the former tin
mine into Thailand’s most successful resort development but it was also pivotal
in the emergence of Phuket’s property market.
The strength of Phuket is reflected by the continuous increase in land prices.
Prime areas for transactions include Kata, Patong, Bangtao and Surin. A
beachfront plot in Karon, on Phuket’s west coast, recently sold for 40 million
baht per rai, while inland plots in Patong are currently fetching 45-60 million
baht per rai. Across the Sarasin Bridge in Phangnga, beachfront land prices have
risen to approximately 15 to 20 million baht per rai, depending on size and
location.
We are now seeing a new breed of luxury developments in Phuket, notably branded
luxury resorts with integrated private residences. The financial viability of
this model, which allows developers to fund resorts through the sale of private
residences, has led to an increase in the number of such projects. The Yamu (a
GHM-managed hotel) and Jumeirah Phuket Private Island are two successful
upcoming projects on the East Coast, while others in the pipeline include
prestigious brands such as Four Seasons, Park Hyatt and TAJ.
New price points are still being achieved in line with improvements in quality
and design. Luxury oceanfront villas in Phuket now start at $5 million and have
hit over $10 million. While prices are constantly reaching new heights, a
segment of the market has also become more investment-driven and buyers are
looking for properties with potential for both capital appreciation and good
rental yields.
The Samui real estate market started in the 1990s with Bangkok Airways’ opening
of Samui Airport. It began with individual owners who bought plots and developed
their own villas, later growing into small-scale beachfront and hillside villa
projects. Samui’s slower development pace when compared to Phuket allows the
island to be positioned as Asia’s boutique resort destination.
Today, Koh Samui is seeing the emergence of a luxury villa market that caters to
an expanding segment of sophisticated travellers. An increasing choice of
residential and hotel developments is available. Adjacent to the new Four
Seasons Resort Koh Samui is The Estates, Samui’s first branded villa development
of 14 units managed by Four Seasons, where more than 60% of the villas have been
sold.
Soon to launch, W Koh Samui Retreat & Residences is the island’s next branded
residence development, and a flagship of CBRE Koh Samui. It offers 17 private
residences set within the 75-room W Retreat. A number of international hotel
chains are also under planning in Samui, including Conrad, Banyan Tree, Dusit,
Park Hyatt and Intercontinental. The island is rapidly transforming from an
offbeat beach destination into an established luxury market, with prices
comparable to those in Phuket.
While Phuket remains the most mature resort property market in Thailand with the
widest range and highest prices, Pattaya is undoubtedly the most popular
destination, with more than 6.6 million visitors last year. Tourism is a main
factor in the growth of resort real estate, and Pattaya has attracted a mix of
foreign and Thai interest. The majority of recent developments are high-rise
condominiums where prices have quickly progressed from below 100,000 to more
than 125,000 baht per sq m. In high-end villa projects such as Baan Talay,
prices of typical two-bedroom villas with partial sea views range from 15 to 30
million baht, depending on size and view quality, while premium first- and
second-row beachfront villas have sold for between 50 and 100 million baht,
though these are in limited supply.
While other markets are led by foreign buying, Hua Hin has traditionally been
led by Thai buyers, with limited overseas interest. Yet prices have increased
over the past year as more quality developments are being launched. Pricing in
new luxury condominiums, such as Major Development’s Marrakesh Hua Hin, a
Moroccan-themed low-rise development, averaged more than 130,000 baht per sq m.
The project is located on a prime beachfront site right at the centre of Hua Hin
beach.
We see an important government role in stimulating the Thai resort property
markets, and some positive steps, such as tax incentives, have already been
introduced. We believe ownership structures that encourage foreign ownership
will be critical, particularly for Samui and Phuket, where demand is mainly
foreign. An extended lease term for land (from the current 30 years) will
encourage villa markets in key destinations, while resort condominium markets
would benefit from raising the foreign ownership quota above 49%.
I believe Thailand’s resort markets have the potential for further expansion as
buyers continue to seek new locations such as Phangnga and Krabi, or even
private island destinations in the Andaman Sea (Yao Noi, Maiton, Naka Yai) and
Gulf of Thailand (Koh Kood, Koh Chang). However, if no improvement in tenure is
offered, opportunities may be lost to regional competitors such as Malaysia,
Vietnam and Indonesia, which offer a more convenient ownership structure and
longer lease terms of 70 years (Vietnam) and 99 years (Malaysia).
Note: David Simister is chairman of CB Richard Ellis Thailand. For
more information, visit www.cbre.co.th.
