The 'Two Ps' of Market Dynamics
The government's property-tax stimulus package will expire on March 28, following the Cabinet's recent decision not to renew it. This move has certainly induced demand from domestic buyers, especially for land. But it has not widely attracted new buyers into resort-grade real estate.
The broader residential market of the past 24 months finds itself in a position not dissimilar to that of the US Space Agency Nasa: being hard-pressed to follow up on its spectacular early successes.
This by no means implies that the market is in a state of disarray, as transactions continue and success stories abound, such as Allan Zeman's luxury resort Andara, or recent condo projects such The Eva in Rawai and Bay Cliff in Kalim.
The market is perhaps on the verge of stability, with emergence of a shared future and commitment all around. But, still, there's the haunting question: where are the buyers?
It's hard not to notice the changing winds down south, where Bali is on the rise. Arguably, though, the sheer numbers will bear out the belief that Phuket remains Asia's most prolific resort residential market. Although Bali is stirring, Malaysia and the Philippines have yet to shift from regional to substantial international markets and Koh Samui is struggling, but with little traction.
Developer profiles now and in the decade ahead look to be tipping in favour of Thai-listed firms or those who have access to both debt and capital markets. The curtain is definitely falling on the days of foreign entrepreneurs selling off plan to finance projects, because buyers are becoming increasingly risk averse and are gravitating towards completed units.
Generalisation and stereotyping remain dangerous, however, as there are still foreign developers building and selling projects at all levels. But the pendulum has swung back to provide a more equal weighting for those looking to take their piece of the Phuket pie.
Growing urbanisation has hit the island with listed firm Supalai launching a 518-unit condo in Phuket City with prices starting at Bt1.8 million. Other similar low priced mass-market projects have recently debuted as well.
But back in luxury territory, where supply and demand perhaps had the strongest fundamentals and transaction levels proved resilient during the economic crisis, resales are now dominating the scene because of a recent failure to launch premium projects.
To the rescue, though, is a new phase at the ultra-luxury Sri Panwa estate and Laguna's Banyan Tree Residences. Both are offering new units with prices between Bt100 million and Bt250 million.
To sum things up: the "two Ps" for the moment involve market dynamics. The first is pricing, where new condo projects are offering low-entry points, the secondary market is offering resales of existing units, and buyers who purchased during construction and are not looking to exit on completion.
The other is pool villas. These luxury cliff-hugging ocean-view units continue to fulfill the desire of a strong buying pool for tropical living in the manner of their dreams.