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Hail Mary

Category: , Posted:16 Jan 2010 | 09:22 am

The Phuket Gazette.
Religion and real estate make strange bed-fellows at the best of times. The Tibetans have their prayer wheels, turning the wheels of Dharma, and Catholics say their 'Hail Marys', but how much faith to the rest of us have in the current state of real estate affairs?
As we move into the first year in a new decade, there is still a profound lack of clarity – and faith – about the future of the Phuket property market.
The Edward Burns movie She's the One gave birth to the phrase, 'We just got caught in a downward cycle', which seems to sum up the current mood of many potential buyers, sellers, de-velopers and observers.It raises the obvious question about where we currently stand in the cycle: up, down, or in a strange sleep mode, like the setting on modern consumer electronics.
In 2009, resales became the talking point of the industry. Secondary market transactions took a large piece of the shrinking pie off the back of the global financial crises. While many of the world's economies are storming back, the property industry is recovering like a chronic alcoholic – taking it day by day. In the early days of the decade, you could count the number of resort-grade real estate developments on two hands.
Then in the middle boom years, demand sprinted back supply like Usain Bolt at the Olympics, but in the end, it flattened like a tin can run over by a car.The blame was mostly put on politics, recession, currency flips and saturation.Last year's 'failure to launch' more than a handful of significant new developments has created some fatigue among purchasers returning to the market this high season.
Asking what's new or hot, they are faced with growing resale listings and projects still trying to sell off-plan while the market is asking to mitigate buyer risk with completed units.
I'm reminded of the recent end-of-season American football game in which the undefeated Indianapolis Colts lost their chance to make NFL history.
Benching star quarterback Peyton Manning mid-game and relegating several other stars to the sidelines, the team watched their dreams of a perfect season evaporate right before their eyes, all in hopes that their key players would stay safe from injury, ready for the big playoff games.
In the broader market, we saw off-plan sales prices peak nearly 24 months ago, just prior to then Prime Minister Thaksin Shinawatra being ousted.
The large-scale depreciation of the UK pound amplified the situation, as did a new, unabated supply of real estate.There was also a plethora of other issues, plus the pounding of very large hooves when Lehman's went down. Meanwhile, we have simply moved farther in the cycle, and there's now a rush to take in the profits. Several early off-plan purchasers are now seeing developments hand over products, such as the highly successful Andara.
Markets in places like Hong Kong and Singapore have hit a good degree of saturation. Early promises by Russia and the Middle East have proved loveless, so developers are now brushing up on their Mandarin skills and seeking emerging buyers in Mainland China.
Bangkok came back into stride off the back of the domestic market in the last half of 2009, but Phuket has so far been unable to attract a large-scale presence of Thai buyers.
A growing rental market is also now in play.
Wooed by decreasing long-term rental rates, many potential purchasers are now borrowing a move from the Colts' playbook, and are taking their own positions on the sidelines in a 'wait and see' tactic.
A number of hotel-managed, mixed-use projects have yet to come onto the market. Their strategy is to attract yield-based or lifestyle investment, but that's like looking in a fishbowl instead of picking a number and taking the opportunity to play.
The caution horses are stampeding well ahead of the bulls and bears.
For now, those mighty stallions are having their way in the marketplace.
The overnight bag is packed with challenges: there are changes in leasehold terms for overseas buyers; limited availability of mortgages for foreigners; and an inability to nurture the
domestic segment.
There are also political worries as the Supreme Court brings the Thaksin case to a close.
At the moment, I'm afraid to say that there are more questions than answers.
While land prices continue to rise and infrastructure investment abounds, this destination's long-term prospects look strong.
What's needed now is a bit of good luck, some gutsy plays by developers to reignite new products, and, like the religions of the world, faith that we continue to see the best properties sell through even in the darkest of times. I have no plans to convert to Buddhism or Catholicism just yet; I'd prefer to saddle up a fast horse. It may be a bumpy ride, but it gets you where you want to go.

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