Flat Residential Pipeline Expected Through Mid 2009
The state of play in Phuket's property market has shown a defined flattening of new property launches in the 1st Quarter of 2009 and is expected to remain static through at least mid year. For resort grade properties the only new launch of note was Surin's The Quarter. There remain positive and negative aspects when viewing the fundamentals with no new product out there, the existing supply and take up rates of launched product should improve; but at the same time new launches give profile to the market internationally which helps stimulate sales.
On a wider scale there looks to be a profound impact on large institutional developments with possible price adjustments on land values looming in the market (important note this applies to primarily large pieces of premium land 25-150 rai parcels), which will have a knock on effect from lower appraised values. With this comes less leveraging from banks and with decreased debt to equity ratios then internal rates of return shrink. For Thai investors this will be acceptable in a down-market but for international institutional investors who price in political and currency risk, going under 20% IRR's make investment in the countries property market a non starter.
Viewing this the expectation is that more domestic players will be involved in Phuket's short to medium term market which is a shift from what was once a sector which saw greater foreign investors/developers. One market that will most likely outperform the wider industry is resale's which provide some insulation from development risk and price sees greater flexibility. As of yet the Government has offered little in the way of stimulus to foreign investors in the property market though there are some rumblings that reforms are currently under consideration.