Phuket Post :: Article :: Looking beyond the sea view

While local property trends are an important indicator of the market, it is easy to overlook how Phuket is influenced by wider international factors. Foreign buyers, especially from Europe, have a wide choice of where to buy a lifestyle home. Increasingly � and perhaps without even realising it � Phuket is competing for the same Euros that are being invested with other holiday home markets.

This �competition� may come from Spain, Croatia, South Africa or even Dubai. Understanding these markets can provide useful insights for those with an interest in the Phuket market. By way of example, last summer 20 million visitors passed through the gates of Palma de Majorca airport.

This was a record high. Tourist arrivals coupled with a population of nearly one million has meant an increased investment by the Majorcan government on infrastructure, particularly in the areas of healthcare and transport, even a new conference centre is being built.

This is positive for the island that is still a favourite for European tourists and property buyers. But, despite these improvements, the great number of �For Sale� signs over the past three years showed that there was an excess of properties on the market.

During the stock market boom and the introduction of the single currency, even properties in low quality locations built with low quality materials were easily sold. However, in the times to follow, price expectations had to be lowered in this segment.

Buyers are now generally well informed and high demands for quality have influenced the construction quality on the island. The high-end market � a northwest coast villa can cost up to 20 million euros � has continued to perform well in the last six months.

Demand remains strong and this is encouraging. The continued inflow of new clients into Majorca and the fact that properties have become attractive assets in a time of weaker stock markets are also driving factors.

Easy financing and flexible taxation for properties are further benefits to this market. Majorcan property owners have learned that although the market may experience occasional decelerations, the long term economic development of the island is towards higher prices.

Also, when one country is experiencing slow economic times, another country is prospering. Since 2002, for instance German owners were selling their property and this was being bought by increasingly interested British buyers. Now the German market is coming back again.

The United Arab Emirates is a relatively new entrant into the property arena but is drawing considerable interest from foreign investors. With a population of just over four million, of which 1.4 million live in Dubai, and tourist arrivals of 5.8 million in 2005, UAE is experiencing a vibrant economy that is attracting significant property investment from foreigners.

Several factors have influenced this growth. In 2000, a 99-year leasehold was introduced to allow foreign nationals the opportunity to purchase residential properties.

Furthermore, a statement in 2002 by Sheikh Mohammed bin Rashid Al Maktoum, Crown Prince and Defence Minister of the UAE, made the purchase of properties possible in certain freehold areas.

This was first possible on The Palm and has since been expanded to a number of other freehold areas. With foreign ownership more clearly structured and foreign investors feeling confident, property purchases have increased dramatically.

A study by the National Bank of Dubai shows that the volume of project developments will reach 38 billion Euros by 2010. The top three UAE developers will contribute approximately 36% of the GDP in 2006.

Are there some lessons to be drawn from a mature market such as Majorca and a new entrant such as Dubai? The answer is probably a �Yes� and it has as much to do with the competitive advantage and positioning of markets as it does with proactive policies to encourage property investment.

The property market in Phuket has grown organically in the past and when compared to the development in more mature markets, such as Majorca, Phuket has significant potential for growth.

The major developers have yet to �move in� and the market is still constrained by the lack of established mortgage products and complex ownership structures.

Solve these catalysts and the market will run. One thing is for sure though: within Asia, Phuket has little competition outside of Thailand. But when you have an advantage it becomes a question of maximising it � and when competing with larger and more mature markets nothing short of a world class �everything� will suffice.

Phuket property values while appreciating still have a long way to go to reach European levels and this represents good value for property buyers. The market is just starting out and with some careful and thoughtful planning can allow for a long period of sustainable growth.

Martin Phillips is managing director of Engel & Voelkers Thailand.
www.engelvoelkers.co.th
Tel: 076-279 280-1