Villa Sales Issues:

An interesting trend in Phuket is the change to the definition of “luxury villas”, both in terms of pricing and location. As pricing levels push upwards, with an average price of THB 125 million in the top tier sector, there is some discussion as to where “high-end” becomes “luxury” and which properties exemplify this trend. In the past über luxury was benchmarked to Amanpuri, followed by a few select properties such as Trisara and Banyan Tree but the growing supply of properties coming online in the THB 100 million to THB 200 million range is re-defining the luxury landscape in Phuket.

Another related change is location, location, location. It used to be that the West Coast and its “Millionaires Mile” was the home of luxury in Phuket. However, with a growing high-end pipeline on the East Coast with banner projects such as Jumeirah Private Island, Taj Exotica and the Philippe Starck/Jean-Michel Gathy collaboration at The Yamu, it is likely that the landscape of Phuket 2.0 is going to be a very different place.

Looking Ahead:

Change In Demographics: The Tourism Authority of Thailand has been very effective in opening up new tourism markets. Its current focus on increasing the emerging Chinese, Russian, Indian and Middle Eastern visitors should allow Thailand (and Phuket's property market) to benefit greatly from shifts in global wealth.

Arrival Of The Super Tourists: A major trend in the luxury travel market is the rise of what is being termed the “super tourists”. These individuals are conspicuous consumers of extremely high-end products. Phuket is positioning itself to be attractive to the extremely wealthy with the addition of a planned private jet airport. Furthermore, recent upgrades to the marina sector mean that mega-yachts can presently be accommodated at three local marinas.

Phuket Boating Market: Phuket is becoming known as a boating destination. Its sheltered East Coast is ideal for marina developments and is a logical access point to Phang Nga Bay. Given the sheer size of the global boating market and the value of marina residential properties and boat slips in other markets such as the Caribbean and the United States, this represents a valuable opportunity for developers in the region. At present, Phuket has four operational private marinas (as Jumeirah has not yet come online).

Smaller Boutique Developments: The shortage of suitable land in prime areas has led to an increase in the number of small scale developments, with 20 or fewer units. Examples of this trend include Tamarind and Sava Natai. We expect this trend to continue as availability of land shrinks further.

Infrastructure Development Keeps Up: Appropriate infrastructure is being developed in support of the long term growth of the tourism market, including the expansion of the Phuket Airport's passenger handling capacity from 6.5 million to 11.5 million by 2010. It is expected that airport traffic will continue to increase and that the airport will be extended further to cope with the forecasted 15 million arrivals per year.

Community Consultation: In line with other parts of the world, there is a grassroots process emerging in Phuket, which is directly related to the effects of development on local residents and their livelihoods. An example of this is the refusal of planning permission for the small marina planned at The Yamu, in response to community dissent. The new Governor of Phuket, Dr. Preecha Ruangjan has indicated that development projects will be more carefully scrutinised in future to assess their benefit to Phuket as a whole.

We view this as a somewhat positive development as much of Phuket’s charm lies in its natural environment and sustainable development is the key to longevity in the residential market. However, it is important that the long-term interests of investors are also taken into account and that any consultative process remains a balanced one, to maintain Phuket’s position as a market leader in the resort residential market.