A Property Market Named Desire
Going by the numbers, the sunny isle of Phuket has seen a flourish of economic growth in 2007. It's been a banner year for tourism with arrivals looking to exceed five million. Hotel occupancies together with average room rates have now pushed past the pre-tsunami boom years.For the property market, however, the year has been a mixed bag, given the effects of the military coup, the brouhaha over changes to the Foreign Business Act and now uncertainty over the December 23 general election.
While the political landscape remains uncertain, the investment climate has continued to be buoyant with high-profile, international-investor-driven projects, such as the Shangri La, Taj, Raffles, Marriot Vacation ownership expansion, The Yamu boutique hotel and Jumeirah Private Island Resort.
Major hotel branding has also continued with French chain Accor opening the Mercure in Patong, Singapore's Millennium soon to open at Jungceylon and the Marriott opening four new managed projects under its core brand Courtyard flag in Surin, Kamala and Patong.
Tourism remains a key indicator for property sales in Phuket, but the industry has had its ups and downs throughout the year. Tracking performance in the property market in Phuket, however, is not straightforward. The hotel market has hard data on the number of hotel rooms and to a lesser degree competitive figures within the branded hotels on occupancy and rate being traded.
In contrast, transaction data for mid- and upper-level properties are not readily available to the public as in most Western countries. Reasons for this include many overseas buyers preferring leasehold properties and that some projects' sales are on share-purchase agreements that are signed overseas, together making tracking transactions through the Land Office a daunting task. During the first half of 2007, there was clear a fall in sales according to most of the larger developers here, which was expected given the political issues and removal then-Prime Minister Thaksin Shinawatra. But now, in the fourth quarter, there is an upswing, which is consistent with the arrival of high season.
Keeping track of trends is important in any business and the property business does track the hotel market in Bangkok. By the numbers, in a market which caters to a good amount of corporate business, the first three quarters of the year saw demand down by 15% to 20%, mainly in the business segment, but the fourth quarter is showing marked recovery and growth despite new accommodations entering the market.
Supply is increasing, as one can easily see by simply getting in a car and driving around the island and seeing the building sites and billboards. What was once a fledgling market has now become a full-size industry in itself.Other overseas markets are keen to use Phuket as a blueprint for success. During the past three months, we've seen groups from both the private and public sectors from Vietnam, the Philippines, Malaysia and China taking a serious look at both the mixed-use and individual property markets, and trying to create their own blueprint or adopt the best practices in their own local markets. The Malaysian government has thrown open the doors to the foreign retirement market and in Vietnam laws have been revised, increasing long-term land leases from 50 to 70 years.
One thing for certain is that Phuket, as the "darling" of the resort property market, has become an object of desire for many competing markets in Thailand and elsewhere in Asia. Moving into 2008 and beyond, one key component needed to sustain the momentum is aligning the industry with tourism. While Phuket property has remained dominated by buyers from Hong Kong, Singapore, the UK and now from Scandinavia; the question is now to pick up demand to keep pace with supply growth. The burning question is, "Where will the buyers come from in the next few years?"
As with tourism here, property agents aim to extend real estate sales to new international markets, which requires overseas marketing. The power of Phuket as a brand name seems to have enormous potential. Certainly adding to this is the diversity within the "Greater Phuket" area, which includes Phang Nga, mainland Krabi, Koh Lanta and the Phi Phi Islands, together forming a unique offering compared with any other market in the region.
Although the Tourism Authority of Thailand does generally promote Phuket and the surrounding areas, it simply covers too large an area. Meanwhile, there is no Phuket-based organization promoting the common agendas of tourism and related industries, including property, which are already greatly linking their agendas to boost the number of international visitors to the island. There are examples of extremely efficient destination marketing initiatives, such as the Singapore Tourist Promotion Board and Hawaii Visitors Bureau, which have played important roles in tourism growth in those locales.
Hopefully, there will be wake-up call for Phuket, which is so dependent on tourism and its offspring industries, including property. A wake-up call that fills the new hotels under construction, to provide visitors to the shopping malls and buyers for the villas and apartments. A wake-up call that results in investment in collective marketing and a focus on developing new markets for Greater Phuket, which will help retain and develop Phuket's market share in a competitive global economy.