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Potential remains high for Phuket real estate

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There were just 1,862 new condominium units launched for sale in Phuket, Thailand, last year, from seven projects. AFP

Potential remains high for Phuket real estate

As one of Asia’s best tourism destinations with an increasing number of visitors each year, property business is among the sectors that continue to grow in Phuket, says Nattha Kahapana, deputy managing director of Knight Frank Thailand and head of the Phuket operation.

The large number of foreign tourists visiting each year includes a large group that has started to look at condominiums to buy, so they can have a place to stay when they visit the southern Thai island province.

Some also sought additional rental income when they were not in residence. For these reasons, the real estate business in Phuket drew great interest from investors, who saw foreign tourists as a main source of purchasing power.

Thai investors also turned their attention to the market. Condominium projects that launched in Phuket were generally of the types that focus on rental returns and invite hotel brands to manage the properties, which boosts the reputations of the projects.

With the rental yields received, Phuket has become an attractive place to buy condominiums for investment. However, the Covid-19 pandemic drastically reduced the volume of tourists, rendering them incapable of travel. Heavily reliant on tourism, the economy of Phuket came to a halt and became sluggish, Nattha said.

Many of Phuket’s economic sectors have been severely affected, including tourism, employment and even real estate.

The real estate sector of Phuket has been directly affected. Even though Thai tourists continued to come, they were not enough to revive the economy of the island, Nattha said.

At the same time, however, new condominiums launched for sale. Their operators believe that many tourists and investors would continue to fuel demand for condominiums when the situation returns to normal.

According to research results of Knight Frank Thailand, the total supply of condominiums in Phuket stood at 26,096 units as of the end of last year.

There were just 1,862 new units launched for sale last year, from seven condominium projects. This figure is close to that of the years before 2016, when there was an average of around 1,700 to 2,000 units launched for sale per year.

But the number of new units launched this past year decreased by some 65.97 per cent from 5,471 in 2019.

This significant drop in new supply is largely attributed to the Covid-19 outbreak, which has severely affected demand.

Moreover, rising concern among commercial banks over the uncertainty of the situation and tightened lending criteria for project development have prompted developers to delay the launches of projects. A number of condominium projects either saw low sales or had to stop sales altogether, opting to wait and see.

Last year, new condominium launches were mostly in Layan, at 59 per cent, followed by the Patong and Naithon Beach areas, accounting for 22 per cent and 13 per cent, respectively.

The Mai Khao Beach area saw the smallest number of new condominium launches, at only six per cent of the total supply. Mai Khao, an area in the north of Phuket, is not yet very popular as it is far from amenities, compared to other beaches. As a result, Mai Khao has quite a lot of land available.

Last year, a total of 19,761 units were sold, from a total supply of 26,096 units, which represents a sales rate of 75.7 per cent. This was up from 2019, when it was 73.4 per cent.

There are around 6,335 units left for sale. The number of new condominiums sold last year was only 1,966 units, which has decreased from 2019’s 4,036 units. This decrease is due to the lack of foreign tourists, a major source of purchasing power, who were unable to enter the country because of the Covid-19 pandemic.

THE NATION (THAILAND)/ASIA NEWS NETWORK

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