Life After Death
Flat as a pancake; ground zero; the patient has flatlined. The market hasn't simply slowed – that would be good – it's dead. All these phrases have been used to describe the state of the Phuket property market of late. This sentiment seems to be growing. A piece recently written in the global edition of the New York Times said Phuket's "rampant development has ground to a halt". As if to illustrate the point the article was accompanied by pictures of a construction crane not moving at twilight and a deserted beach with unmanned sun loungers.
Looking closely at the caption reveals the words "photo agency", indicating stock photos. Most likely, the beach photo was taken at six in the morning, and construction site snapped when people were on their lunch break – it's all too staged to be real. What it does prove is that the all-important market sentiment has turned, even locals are becoming more vocal about the downturn and current market conditions. The line between truth and fiction remains a very fine one and to find out what is really happening requires more than simply looking at some facts and figures.
The current downturn has been compounded by a market that was hit hard a few years ago thanks to the Foreign Business Act scare and the Thaksin coup. Since then we've had subprime lending, a few prime ministers and prime time news events including swine flu, airport closures and the emergence of so many different colored shirts that I've lost track of who's who.
2006 to 2008 saw new project launches arrive in double-digit waves. Supply came so fast in all segments, that it was simply impossible for demand to keep up. At the same time new segments, namely resale's and rentals, enjoyed a slice of the pie for themselves, further displacing new project sales.
If you look at the broader real estate market, there has been and continues to be a reasonable volume of registered transactions. The problem however, is that the pace of sales is considerably slow, largely because there is so much for sale out there.
During the past few weeks I have been out and visited projects from north to south, east to west, to see exactly what was happening on the ground. Here is a recap of what's on offer, as well as what's selling and driving demand:
Jonathan Gascoyne, Sales and Marketing Director of Andara Phuket, said, "The Andara Villas are now 100% sold out. Now the focus is on the boutique-design hotel lifestyle condominium – the Andara Resort Residences". Of the 37 Resort Residences units, 40% have been sold. The prices for the remaining units range from 33 million- to 84 million-baht. Completion is scheduled for October, and the opening of the resort – touted to compete with Amanpuri, Trisara and Banyan Tree – will take place in December. Introductory rates will start from US$1,500 to $2,600 per night, while amenities will include a beach cluband an Asian fine dining restaurant. In keeping with all things developed by Allan Zeman, attention to detail will ensure this is a quality operation.
Ian Spurdle, Sales Director of Tawan Views, revealed, "The East coast location has been a strong plus with its proximity to boating, the island's best golf course and access to Phang Nga Bay and its islands wooing many buyers". Of 24 units, 11 have been already sold – the key feature of only one apartment per floor proving to be a strong selling point. Additionally, the Ao Po Grand Marina has drawn many high net worth individuals to the location, generating demand.
Steve Brajak, General Manager for Raimon Land Phuket, told me, "Of 51 condominium units, only eight are left for sale following some notable transactions recently". The key factor for this project is that it is 100% complete, making them preferable to some buyers who do not want to take risks on unfinished developments. A design brief from project leader Hans Brouwer, which created plenty of "wow factor", has also provided some important unique selling points that have attracted purchasers.
Richard Pope, Developer of Kata Rocks, added "Pre-sales are going well with 16 of 34 units gone and the aspect of oceanfront property driving interest". With premium pricing of over 150,000 baht per square meter, the development has shown that location, even in a challenging market, will prove to be a trump card. The project hit the papers recently when Edward "Bear" Grylls, host of the Discovery Channels' Man vs. Wild, bought a penthouse unit. It's rumored that he is looking at a Patong segment where he is dropped into Soi Bangla at midnight wearing only a loincloth and a set of knock-off havaianas for survival.
So there you have it without looking through rose-tinted spectacles. Projects are selling at a slow pace, but the fact is, transactions are being made and many developments are being completed. Unlike the US, we are not seeing homes sell for 10 cents on the dollar and banks, for the most part, are not foreclosing on developments which results in market prices going into freefall.
Phuket is no ghost town at the moment and all those reports of our imminent demise, for the most part, are hugely exaggerated. Still, sentiment has raised its ugly head and therefore the priority must be to keep a balanced and informed view both here and abroad. Wait, we've got a heartbeat…