Minggu, 01/03/2009

Phuket Still Good Investment Place

-jktproperty.com
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Phuket Still Good Investment Place

CB RICHARD ELLIS Thailand said that Phuket’s property boom over the past five years had started to decline from the fourth quarter of 2008 due to the current global recession. The firm’s statement went in line with the significant fall in the number of new property projects launched and the number of transactions made, and also the cancellation of many property projects.

Yet, developers in Phuket are still optimistic that Phuket is still on the right track. In the 5-year booming period, Phuket experienced significant hikes in the prices of its high-end villas, by 50-75 percent, and the same also happened with land prices. The condominium sector also enjoyed significant price hikes. Data at Raimond Land says that around 850 property units entered the market in 2006. They were more than two times the 2004 number. The majority of condominiums were sold out at US$50,000-US$500,000 per unit.

The relatively good prices have made Pukhet even more attractive to middle-class buyers, mostly from Europe. The executive director of CB Richard Ellis, James Pitchon, said, “The attractions are obvious. You have a sunny location, good schools, hospitals and a secure environment. Anyone working in a horrible climate wants a second home in the sun.” Pitchon recorded around 300,000 British nationals who owned homes in Phuket, their vacation destination. The majority of visitors to Pukhet, its hotel guests and even its property owners are foreigners, making the place a foreign-driven market.

In global recession times like these days, a number of foreign-driven markets have collapsed like in Spain and Florida. Question: Will Pukhet face the same fate considering that its booming period is now declining? The chairman of CB Richard Ellis (Thailand), David Simister, said that Phuket’s weakening market has mainly been caused by the closing of airports last December, which resulted in a drastic fall in the number of incoming tourists.

But, Phuket is predicted not to face the same fate as other foreign-driven markets. It is special in the sense that many units of the quite many newly built projects have been sold out, and the number of unsold units is relatively quite small. The most recent data at CBRE’s Pukhet Property Report, which is based on quarterly analyses, shows that 89 percent of the total 3,000 newly built units have been sold out. The condition of the condominium sector is almost the same. A total of 92 percent of 2,000 newly built condo units have been sold out.

In the coming months, property supply is predicted to decline due to the delays and cancellation of a number of projects. The manager of the research section of CBRE, Nabeel Hussen, said, “Our earlier estimates called for as many as 1,700 condominium units to be completed in 2009, but we believe a number of projects will be delayed due to slower take-up rates. Similarly, in the villa market, we have identified over ten projects with more than 450 units that went on hold or were delayed during Q4 alone, while it also appears that around a quarter of all upscale hotel rooms under development are now on hold as well.”

That condition, Simister said, exactly gave positive signals about Phuket in the long-term. “In the long-term, we remain bullish on this market, since we belive that buyers of luxury and high-end properties tend to make choices based on lifestyle and not primarily on pricing. That being said, it is unlikely that demand for these high-end properties will recover before the global economy improves”.

Another reason why Phuket still can withstand the current condition as compared with other foreign-driven markets is that almost all transactions in Phuket are made with cash. This makes the Phuket market relatively safe against the “bubble” condition because in the area people prefer paying in cash to credits.

Prices would not plummet

Given the present condition of Phuket, many property consultants and sellers do not wish to reduce prices. They say price cuts are not the best way of attracting buyers. They reason that buyers in Phuket mostly buy property assets for long-term investment and for private use. Reducing prices will not provide significant influence over buyers who value property assets from quality aspects. As such, the better way of attracting buyers is giving them with incentives.

The managing director of C9 Hotelworks, Bill Barnett, said, ”We see no evidence of a correction in the Phuket market. Normally a downward trust in property prices is the result of leveraging or debt in the market, with developers going to the banks for refinancing and write-downs on units. In Phuket 90 percent of the resort-grade real estate is owned by foreigners and there is no leveraging available to them. Fundamentally there is no reason why the prices should correct because there is no downward pressure.

All we’re seeing is a flattening of demand.” Even if there are delays and cancellations in property projects, it is viewed as normal. In March, Raimon Land delayed its Amalfi Phuket and The Edge Pattaya projects so as to keep up its cash-flow amidst declining demand. Property experts even predict that other developers will follow Raimon Land’s steps.

Rebecca Smith, sales director of Phuket Ocean Villas holds the same view, saying that now is not the right time for developers to enter the market or increase their supply in the current unstable market condition. However, experts say that the Phuket market condition is far better than other island in Thailand like Koh Samui, Hua Hin and Pattaya. The islands have been the hardest hit in the current global crisis. The Phuket property market has succeeded to survive because it is unique, dynamic and relatively safe from the current unpredictable global recession. Phuket is even predicted to develop further. (JR)