Standalone villas shake up traditional hospitality supply as the market rises. Increasing demand for multi-bedroom accommodation growing, coupled with a preference for spacious and private villas according to new research from C9 Hotelworks in their new Samui Villa Rental Market Review.
In recent years, private villas rented as vacation homes have emerged as a significant segment of tourist accommodation in Samui. Platforms like Airbnb serve this market, offering a range of options from midscale to luxury properties. Independent management companies such as Elite Havens, The Luxe Nomad, and a handful of local groups are significant players in the luxury segment as many consumers require other management and concierge services in addition to only rentals.
According to our market research, there are approximately 5,800 holiday rentals available in Samui. These properties market-wide have an average daily rate of THB13,700 and maintain an annualized occupancy rate of 55% year-to-date in 2024, resulting in a Revenue Per Available Room (RevPAR) of THB7,535. With favorable returns, we see increased investment in the sector, particularly in upscale build-to-rent villas.
While the post-COVID growth of villa developments marks growing family demand on the island, many of the properties lack professional management and product standards, whereby the owners focus on visual presentation and low rental rates as a main sales strategy. The concentration of this supply is located on inland hillside areas with lower investment costs, resulting in reduced rates. Rate pressure does not affect beachfront villas as inventory is still limited.
With spreading competition from often unregulated hospitality supply, the market is turning to management companies with a local operating presence. Access to clientele through brand recognition does not only increase overall rental turnover and rates but also result in better overall cost control from management. Operations are becoming increasingly challenged by the lack of skilled manpower.
To read and download C9 Hotelworks full Samui Villa Rental Market Review CLICK
Phuket’s massive influx of new real estate development is witnessing rising competition from the secondary marketplace. The collision between off-plan property sales and resales is inevitable given the sheer number of units being completed and a growing critical mass of older properties.
Comparing primary and re-sale transactions on the island from the first four months of the year compared to the same period last year is a substantial shift in buyer preference. Newly released data by Thailand’s leading property portal FazWaz.com shows that from January through April 2023, primary and secondary home and condominium sales were evenly balanced. But moving forward to the same period this year, resales now account for 68% of transactions. This dynamic change is even more for single-family homes, where the number is 70%.
Going deeper into the data reflects that while condominium sales have continued to be robust, transaction values are nearly down by a third, highlighting that entry-level unit types and midscale developments are experiencing the highest demand. Brennan Campbell who leads brokerage at FazWaz says “our data is pointing to an even larger disparity in single-family home transactions where the secondary market is surging, but with considerably lower sales values as a result of lower-priced resales. We expect pricing to be the talking point going forward and increased pressure on developers to compete with resales.”
Moving on to the nationality mix of buyers of Phuket real estate the top international source markets for condominiums in the first part of 2024 were Russia, UK, US, France, and clustered together Australia and Italy. For single-detached homes, the leaders are the US, the UK, and bundled fairly close together Russia. Australia, Italy, Netherlands, France, and other Eastern European countries. A notable growth market is India. Speaking to the domestic side of transactions the Thai domestic segment has continued to post gains in all types of property classes this year.
One of the leading concerns of property developers is the potential slower demand by Russian buyers as the island moves out of the peak winter snowbird holiday period. Another factor has been a highly publicized crackdown on Thai nominees fronting for foreigners purchasing real estate under companies. This has effectively moved the needle for Eastern European purchasers to a preference for leasehold single-family homes versus the earlier trend toward freehold. It’s yet to be seen if there is a capital flight from houses to condominiums where there is ability for overseas investors to own on a freehold basis.
With a mounting number of new properties completed during the remainder of the year, and in most cases, these being premium pricing points, there is a widening gap in values over older condominiums and villas. I’d expect this to create strong upward pressure on the pricing of new developments and a broader more competitive playing field driven by a growing secondary sales landscape.
Thai hospitality group Dusit International has signed a deal with VillaCarte Group for their upcoming Layan Verde project in Bangtao Phuket.
The agreement covers 633 units under two brands – Dusit Residences and a Dusit Collection Hotel.
An opening is planned in 2027 with a key highlight being an EDGE environmental certificate.
VillaCarte Group has developed other projects in Phuket including Layan Green Park and La Green Hotel and Residence.
For more on the Phuket Branded Residences Market, read C9 Hotelworks latest report CLICK
Branded residences, condo hotels, mixed-use projects, and vacation home rentals are becoming a significant player in Thailand’s hospitality space. As property developers, real estate investors, and property buyers are learning, this is a complex space that requires well-structured projects.
Join us for a unique 90-minute co-working lunch learning session about all the moving parts in this rising marketplace and how Thailand’s regulatory framework administrates these segments. We will be giving a commercial overview of the marketplace and going over frequently asked questions about Thailand’s Hotel Act, Land Development Act, and Condominium Act and how they apply to each specific hospitality component. Get insights into how to avoid the most common mistakes.
Other highly relevant topics include taxation for vacation rentals for developers and property owners, a dive into the processes involved in obtaining a hotel license, and how EIA’s (environmental impact analysis) are a key factor in developments.
The C9 Sessions is an ongoing initiative by C9 Hotelworks in providing educating the hospitality industry, inspiring change and advancing entrepreneurial thinking. We are proud to be supported by HOMA, Hughes Krupica, HLB Thailand, PropertyGuru Asia Property Awards, and Original Vision for this event. This session will be invaluable for developers of branded residences, condo hotels, mixed-use properties, and vacation rentals along with real estate brokers, hotel owners and management groups.
Event Schedule
Date: Friday 31st May 2024
Venue: HOMA Cherngtalay – Restaurant
Registration: 11:00 am onwards
Session: 1130 am to 1:00 pm
Understanding Thailand’s Branded Residence and Condotel Issues and Challenges
Bill Barnett, Managing Director, C9 Hotelworks
FAQ’s – Hotel, Condominium, and Land Acts for Mixed Use Projects, Branded Residences, Condo Hotels and Vacation Rentals
Desmond Hughes, Senior Partner, Hughes Krupica
Vacation Rental Tax Primer for Owners and Operators
Paul Ashburn, Co-Managing Partner, HLB Thailand
Hotel License Process and EIA Regime
Prasert Chanom, Director, Original Vision
Award Marketing for Brand Residences, Mixed Use Projects and Condo Hotels
Sumi Soorian, Chief Marketing and Commercial Officer, The Headland Cape Yamu
Attendance is complimentary. Advance registration is required and QR code from Eventbrite is required for entry.
HOMA is offering a special Grab n Go lunch option that can be ordered and paid for in advance. Parking is available and details will be sent out before the event.
Please click for free event registration HERE
Catch this special event this coming Friday 26th April with a special preview of the new MIRA Valley master-planned community in the heart of Phuket, Manik. This is an amazing opportunity to acquire a development plot in a larger high-quality community.
This will be of special interest to property developers looking for land parcels, investors. and brokers. The plots are suitable for luxury home estates, townhouses, and condominiums, private schools, medical and wellness facilities, commercial and sports projects. There are development plots from 9 to 30 rai and above, which can also be combined.
We will be holding three one-house introduction sessions led by Bill Barnett of C9 Hotelworks who will give an update on the changing island Phuket infrastructure and key demand generators. An overview of the project, available development parcels, and details will be available as a chance to meet directly with the owners who are a highly experienced property group.
Space is limited so please confirm the session and timing if you will attend. The link to reserve is below:
Given the backdrop of a booming Phuket real estate sector, one area that is often overlooked is the rental market. Despite a vibrant vacation short-stay segment, there remains a strong demand for extended and long-stay rentals across the island.
Rental demand coming out of the COVID19 pandemic experienced sustained uplift and has continued to perform well. Despite a return to seasonality for Phuket’s tourism sector, rentals have continued to post year-round gains.
Rather than simply asking what real estate brokers thought about rentals I took an opportunity to sit down with Brennan Campbell, Head of Brokerage at Thailand’s leading property portal FazWaz.com. Digging through data was the way to go and the idea was to look at full-year figures from 2023 and year-to-date 2024 to look for trends and changes. The figures may surprise you and no doubt give more insight on actual demonstrated demand.
Starting at the top and looking at the most popular real estate class for rentals, condominiums hold nearly 60% share, while detached houses in estates or projects make up over 20% share. Townhouses and stand-alone homes are both under the 10% marker. Comparing 2023 vs. 2024 condominiums are continuing to show growth.
Diving into specific condominium configurations in terms of popularity, one-bedroom units hit a share of over 40%, followed by two bedrooms at 20% and studios a similar number. Tracking year-over-year trends, smaller units that are lower priced are becoming more popular and there is a trading down of unit size due to pressure on prices.
On the house front, three-bedroom units stood at 55% demand in 2023 but became less attractive this year. In 2024, a quarter of rentals were four-bedroom homes.
Looking at the nationality of renters Russia tallied nearly one-third of the market in 2023, but this year has shifted downward to just 25%. Moving through the Top 5 sources of business are Thailand, the US, UK, and Australia.
Moving to submarkets, last year and this year have seen significant changes, though it’s important to note that 2024 is not full-year data. In 2023, the Top 5 submarkets were Cherngtalay, Patong, Kamala, Srisoontorn (inland). Kathu, Rawai, and Chalong also ranked well.
In 2024, Cherngtalay is at the top but again this is Q1 data and there is the winter snowbird effect. Rounding out the Top 5 submarkets are Kamala, Rawai, and Patong/Kathu.
Rental tenure was a changing landscape last year and in 2024. In 2023, the average term was just over 10 months while this year has slightly reduced to just over 9 months. Three-six-month terms are popular but not nearly as strong at yearly rentals which account for over half of the demand.
One surprising trend when reviewing 2023 rentals is that there for extended and long-stay terms, demand remains consistent throughout the year. There are not the same seasonal spikes as in tourism, but looking closer at peak season it appears renters are less inclined to enter into rentals, no doubt as a result of high prices of vacation rentals.
Tagging onto this is average market-wide rentals with a median monthly rental last year being THB68,000, and a similar number this year. This is an island-wide average and is for the overall condominium and house segments.
For buyers of Phuket property, taking a view on recurring yields is a good alternative to focusing on ‘the big flip’ of market appreciation. Real estate can be a wise long-term investment but removing as much risk at the acquisition stage is important.
The best advice is for buyers to do their homework and identify what are the most popular rental configurations, submarkets, and projects. Online sites now offer good historical data on rentals but this is just one element of buyer due diligence. Work through the numbers, and understand the difference between gross and net rentals, as often common area or maintenance fees are not factored in. Anticipate and plan longer-term maintenance expenditures, especially for houses and villas, these are capital-heavy investments and Phuket’s tropical weather takes its toll.
We do expect more ‘build to rent ‘property developments in Phuket in the coming years, though a key deterrent is underlying land costs that are skyrocketing. In the serviced apartment sector, we have seen HOMA with two open properties and a third coming in Chalong take a view on sustainable cash flow from rentals. As the island’s story continues to mature and fragment, rentals remain an ongoing evolving storyline.
One of the most common questions I am asked these days is about a potential Phuket real estate bubble. While it’s a popular buzz term, so many who ask the question don’t understand what a bubble is.
The most notable real estate bubble in recent history was the subprime housing crisis in the United States in 2007. In other sectors, there have been bubbles like the dot.com crisis of 2000 and 2018’s crypto-crash.
Fundamentally bubbles are when valuations reach unrealistic numbers and underlying fundamentals of sustainable growth go awry. This typically results in a crash, and in real estate terms, that would mean a sharp drop in property prices.
In many parts of the world, especially the West, real estate is susceptible to a bubble as a result of being impacted by liquidity in the marketplace. When there is the absence of cash, loans or mortgages are more and more highly leveraged and the risk gap widens into a crevice. Enter the crash scenario.
Phuket’s real estate fundamentals are very defined and unlike any other market, I know of. They can best be summarized as –
- The majority of property transactions are on a cash basis.
- Resort-grade real estate’s total market value well exceeds domestic housing in absolute numbers.
- Thai buyers who finance or borrow on properties represent a minority segment of the market.
- Development of projects is often linked to phasing and actual sales, hence developer default remains low.
- The geographic source of buyers on the island is spread across many countries, economic indicators, and currencies, which effectively mitigates single market risk.
That said, there are signs that Phuket is reaching the top of a property cycle and there are learnings from past events.
Just over a decade ago, the island saw an influx of small, low-priced condominium projects by Bangkok-based developers enter the market. With Asia one of the first regions across the globe to come out of the financial crisis and a growing middle class, we saw Thai buyers viewing this segment as its very own investment class.
Similar to Bangkok, and what at the time was termed as ‘Mickey Mouse’ flats that were small and cheap. Payment terms were back-loaded on completion and buyers often snapped up multiple units intending to flip on demand-led appreciation, before transfer (final bulk payment or mortgage kicking in).
To cut a long story short, this speculative phase eventually flattened as Phuket simply did not have enough end users for this volume of product, and buyer default rates rose often to 30-40 percent of total inventory or more. In the end, many of the Thai developers refocused back to Bangkok, and eventually over time the inventory was absorbed.
We are now experiencing a spike in two distinct segments – condominiums and villas. For condominiums, there is a key difference in the buyer profile though there has been a sharp rise in foreign buyers of these products. They are most cashed up and capable of closing so it’s unlikely the default rates will teach that of a decade ago. But, there are still a growing number who are looking to flip before completion so we are reaching a highly speculative market cycle on large-sized projects with low-priced condominiums.
For villas including resort-grade homes, the pandemic spurred a massive migration to Phuket led by urban flight, work-from-home changes, and a growing emphasis on quality of lifestyle. Couple this with a dramatic evolving geopolitical crisis in Eastern Europe and Phuket suddenly saw its legacy retirement or second home sector taken over by an influx of end-users.
Global migration has changed our world, and Phuket’s geography as a winter haven for much of the Western world is a strong driver of demand. Thailand’s government-mandated program including Thailand Elite pay-to-play long-term visas, retirement program, and international education guardian visa that extends to families are key factors in attracting real estate buyers.
But let’s move back to the Eastern European buyers who have become the leading force in Phuket’s real estate market over the past two years. This not only includes Russians but also investors from Ukraine, Kazakhstan and Uzbekistan. For tourism, we always say you can’t stay there if you can’t get there, but this also applies to property buyers as well. Anyone who has visited Phuket International Airport in high season can see the Eastern European airlines outnumber any other carriers.
For Russians in particular, the rise of their transactions in Phuket property can be linked to an increasingly restrictive environment in the West towards banking, investment, and doing any sort of business. Given their domestic economic volatility and despite declining currency values, they view Thailand and in particular Phuket as a safe haven. Suddenly real estate is the new bank for Russians.
It’s hard to ignore the widespread growth of Phuket’s real estate sector which is challenging tourism as a key economic indicator. In the Greater -Bangtao area alone that covers Cherngtalay, Laguna, and Layan there are over 20,000 residential units either under development or in the pipeline. But, viewing those buying and investing, these individuals and groups are highly liquid, most paying cash and taking a long-term view of upscale premium properties.
I’m not going to even attempt to forecast global geopolitics, but there is little double that over the next 3-5 years we are in for a wide degree of turbulence, so for the most part buyer’s money is staying put in real estate assets. With minimal lending exposure, or a market retreat of buyers back to their own country, any form of crash is unlikely.
What we have learned from the past is there remains an ebb and flow, much like the ocean tide and property is a cyclical endeavor. Once we hit a high, there will be froth, and niche opportunities arise. For resort property, below-market sales are usually mainly due to death, divorce, or personal financial problems so broad market movement is probably not going to occur.
What will happen as has in the past is that demand flattens, a rising secondary sector, and supply becomes competitive to new developments or primary sales. That’s perhaps a rational view of the low season in 2024.
But, and this is my opinion, is that in the big picture of worldwide upheaval, Phuket’s position as a safe haven real estate investment destination could buck the cycle. Growth in other geographical source markets, the return of China, and other geopolitical events will without a doubt spur more diversity in buyers and those migrating to Phuket. As for the bubble, I’ll leave that to the reader to decide.
Bangtao’s development pace keeps growing with noted Hong Kong entrepreneur Allan Zeman set to roll out a new project named Sudara.
Coming up as Phase 1 will be 220 luxury condominiums with one, two, and three-bedroom configurations. There are plunge pools in some premium units.
Resort-living amenities include a 50-meter lap pool, fitness, yoga, co-working space, events space, and underground parking.
Andara Resort Management will provide owner services.
A second phase is planned. Zeman’s Phuket property track is strong, on the success of two of the island’s leading ultra villa estates – Andara and Andara Signature on Kamala’s Millionaires Mile.
Branded residences in Phuket have reached an unprecedented supply value of THB80 billion (approximately USD2.3 billion), setting a new historical high. The destination now has the highest value of leisure supply value globally and has joined the ranks of urban destinations Dubai and Miami as a world-class branded residences property hub.
Condominiums, which form 59% of the market, have recorded an average unit price point of THB 11.7 million. In stark contrast, the median price for villas is THB120 million. Despite villas representing a modest 6% of supply available in the primary market, they command a substantial 41% of the total value, underscoring their significant impact on the market’s luxury real estate segment.
The island’s branded residences supply stands at 27 properties with a collective 4,267 units which are currently for sale, or in the pipeline. The Cherngtalay sub-district on Phuket’s West Coast, encompassing Layan, Bangtao, and Surin, holds the highest concentration of branded properties on the island, totaling 14 properties with 2,352 units.
A key post -COVID19 trend is seeing more hotel developers taking to mixed-use models and branded properties. As land prices on the island are skyrocketing under high -demand conditions, a shifting economic model is putting pressure on hospitality development to include real estate elements in order to create higher investment returns.
Global brands entering the market include Rosewood and The Standard mark the next chapter for Phuket luxury real estate. With branded condominiums achieving a median price of THB160,734 per square meter and villas at THB179,260 per square meter, these high-profile additions are creating a prime global hub for affluent lifestyle property. Despite a strong recovery path for Phuket’s once tourism-dependent economy, the island’s real estate sector is now spurring a game-changing storyline to that of an international community.
To download and read C9 Hotelworks Branded Residences Market Review CLICK
