Don't Sweat the Global Stuff
The times are indeed a-changin', as Bobby Dylan said, and these days my local watering hole has shifted from a pub to the petrol station. I'm now on a first-name basis with those who pump the liquid gold into my thirsty V6. Nationally, some form of economic stability has returned following the election and fast-paced economic reforms aimed at stimulating the economy are underway. One wonders how this will affect the property market here on the fair shores of Phuket.
The barometer of measurement has to be how the past few years of growth here has affected the daily life of the average Thai worker. The number of new cars and motorbikes is growing at breakneck speed, while new mass housing developments are targeting domestic buyers. Take a walk through Central Festival or Jungceylon and see the rush for brand name goods as well as new phones, flat-screen televisions and other items – things are flying off the shelves.
But sit down and talk to Mr or Ms Phuket and it's an entirely different story. The woes of the average working person seem to be mounting and no end is in sight. Transportation and petrol prices are spiraling upward, thus hitting commodity prices. Seafood, a Thai staple, is more expensive as a consequence of fuel increases. Fishermen are forced to raise prices as their daily wages no longer cover the cost of living.
Those farther up the food chain have fallen into the credit gap that is so prevalent in many developed parts of the world such as the US and Europe. Those new cars, phones and homes along with easy access to credit have caused personal savings to fall to nil while debt loads are spiraling. Living the dream is coming at a higher cost than ever before.
That nasty word globalization is becoming a stark reality. Issues such as the oil crisis and the falling US dollar don't only play a part on the far-off world of nightly news on CNN or BBC but are now hitting the noodle shop around the corner from you and I. The property market boom over the past five or six years has been driven by expatriate buyers from nearby Hong Kong – or further afield in London, Sydney or New York – who intended to either live here or have a vacation home in Phuket. Those looking at early retirement have also been drawn here, buying homes that they plan to eventually move into.
Infrastructure grew to meet the requirements of these new residents with international hospitals, schools, marinas and golf courses. One of the key selling points for the island has been having all the amenities of a first-world destination with third-world prices and ultimately many chose Phuket as the cost of living was extremely favorable. Now the tables are shifting, causing potential buyers to compare costs against many other Asian destinations, and in some cases, with those back home. It's not always a favorable conclusion.
Ramp onto this the rising cost of property development with steel being sucked up by China, labor shortages and material increases often outpacing appreciation of property. While we may want to act and live locally, our ties to the global economy are now evident at every turn. While all of this seems depressing and it's still too early in the morning to hit a bottle of Jack, Phuket stacks up pretty well on both a domestic and international playing field. Most of the mid- and higher-end property market is dominated by buyers who have paid cash for homes, unlike Hua Hin, Pattaya and Bangkok where the domestic market rules and buyers are highly leveraged.
There will be no sub-prime crisis in Phuket. Also, the cost of living while rising is still manageable and ultimately the add-on benefits of considerable infrastructure, a beautiful climate and easy access to Bangkok and hubs such as Singapore and Hong Kong continue to make the destination the buzz of the region.The good old days when Phuket was cheap as chips to live in are gone and it's doubtful they will be back anytime soon. It means that we are now competing with both the developing and developed parts of the world for the real estate dollar.
This might be a good thing, as it makes us push up our game, stretch and improve instead of just laying back and becoming fat cats. For investors, it gives freedom of choice, a wider selection and increased value. So that's the state of it: the good, the bad and the ugly. I'm off to the ATM and the petrol station.