Further Reading:
Market Summary Spring 1998
Turmoil in the stock, currency and property markets of Thailand and other South East Asian economies during the last seven months has been well publicized by the world press. How has this effected the property market in Phuket; is now a good time to be picking up a bargain?
First of all it is important to differentiate between Phuket and the rest of Thailand. Phuket’s economy traditionally based on tin and rubber, is now predominantly reliant on tourism, the strength of which is to a large degree linked to the strength of the western economies and in particular the global travel industry. When the world is in growth, so is Phuket.
Phuket’s tourism market (and it’s property market) took a major hit in 1990 as the western economies went into recession, and it has taken until early 1996 for the property market to turn around. Bangkok and the rest of Thailand, operating on a very different business cycle, continued to see growth in all sectors (including property) until early 1996, and only started sinking into a recession just as Phuket was coming out.
That downturn in the Thai economy has, now developed into a full blow crisis for the stock, currency and property markets, and while the Baht and the stock markets may already have tested their lowest levels, there is likely to be considerably more pain in store for the general business and property sectors over the coming year. In Bangkok property prices have already fallen considerably from their peak, but it’s likely that (in Baht terms) their will still be distress sales with prices still lower.
Phuket is as I have explained is on a quite different cycle, it’s tourist based economy is doing exceptionally well due to strong global travel trends and has been further boosted by the weak Baht. Local property is also performing in totally different ways to that in the rest of Thailand, driven as it is by a huge surge in foreign demand as a result of the weak Baht. Prices are definitely on the rise.
However to say that all Phuket property was performing well would an over simplification. While foreign demand is up, domestic demand is stagnant.
Property on beach front, with ocean views or near tourist resorts (generally speaking this is on Phuket’s west coast) has traditionally been the domain of the foreign investor and prices in this area have risen the greatest since devaluation. Asking prices of very prime property and in a few cases even the closing prices, have almost returned to levels reflecting their pre devaluation US Dollar values. Price rises in these areas are of course not just determined by demand, they are also strongly influenced by supply, and where the supply is largely controlled by foreign residents there is an increasing reluctance to sell if pre-devaluation Dollar prices are not being matched. Really prime waterfront resort property is proving to be something of an international commodity with an international dollar market price.
As such we have a situation where some developments with almost total foreign ownership (this is mainly low rise beach front property) is almost back at pre devaluation dollar values, while other developments with considerably greater Thai ownership or units still in the hands of the developer (this is mainly the high rise buildings - even the prime ones) where prices have changed very little if at all even in Baht terms.
The east and center of the island, with greater Thai ownership and lower foreign demand has seen little price support from the devaluation of the Baht and in a few cases (although nowhere to the extent prevalent in Bangkok) prices have eased a little.
Some of the best deals were clearly to be found three or four months ago before the increased demand pushed up prices, but many bargains still remain. Look for prime properties owned by Thais or local residents, where prices have not risen in Baht terms more than 30% (this still represents a discount of about 30% in US Dollar terms). A few are still available with unchanged prices.
Also to maximize your current advantage it’s important to track the exchange rates closely, picking and choosing the best currency for closing and the best time to change currency. At the time of writing this article (early March 1998) the smart money is looking to fix prices in Baht and have a longer than usual closing dates (say 90 days) to give optimum chance to catch a widely speculated further short term weakening of the Baht before a longer term strengthening.
Happy house hunting. For those with hard currency there may never be a better time.