Ripe for the picking - Phuket Real Estate

Ripe for the picking

"The time to buy is when there's blood in the streets." - Baron Rothschild

"You pay a very high price……..for a cheery consensus." - Warren Buffett

Whilst there certainly isn’t blood in the streets here in Phuket the property market remains slow with a consensus to wait on the side lines. A faltering global economy, the weakness of the European currencies, politics, have all contributed to the softness of the market here. Phuket’s rental market has suffered too and is weaker than in recent times: there are less Russians seeking rentals, more hotel rooms and low oil prices mean less people from the Oil industry seeking rental properties.

However, should we really be feeling so pessimistic about the future? The answer is no, Phuket’s future is very bright. All economies have their peaks and troughs and Phuket will surely rebound soon. With the expanded airport due to open this month, strong and increasing arrivals, improving infrastructure, leisure facilities, continued high season rental demand, are just some of the reasons for a positive outlook and expected rebound.

When any market has a correction opportunities will arise and Phuket’s property market is no different. In the resale market we are now seeing sellers reducing prices, in some cases quite heavily and there are buyers / investors around who are picking up these bargain deals. Property at these lower prices will produce higher than average rental returns but they won’t be around forever.

As an example a recent sale of a 130 sqm, 2 bed condo in Rawai, Phuket, foreign freehold with a partial sea view: was sold for a heavily discounted selling price of 4.5m THB! Using conservative rental rates and even at only 60% occupancy net returns are projected to be nearly 6% p.a. (see the table below, rental rates range from just 1,500 to 3,000 THB / night).

The above rental rates above can be compared with the average rental yields throughout the SE Asian region. The chart below shows the average gross yields for Thailand are 5.13% versus Singapore and Hong Kong where yields are less than 3%.

Asia: Gross rental yields (%). - The properties are 120-sq. m. apartments located in premier city centres. 

Source: Global Property Guide Research - The gross rental returns (or rental yields) figures published by the Global Property Guide are based on the Global Property Guides own proprietary in-house research.

The findings by Global Property Guide Research match those of our in-house research into the average rental returns from properties in Phuket. See the below table from our most recent market research report.

The down turn in current market conditions has created opportunities for buyers / investors to achieve above average income returns on property purchases. Property is an important part of an investment portfolio and can generate a steady income return through rental incomes and capital gains upon eventual sale and it seems that now is the time to be buying into Phuket. Why wait to pay a higher price once the cheery consensus is that the market has recovered?  

For more information about this article contact Kevin Hodges, Siam Real Estate (SRE) Tel: 076-324042 Email: ; www.siamrealestate.com