Following the launch of LivePhuket’s partnership with Class Act Media (The Phuket News), we have been inundated with requests from local property owners on the island to help them sell their properties. Although this is a positive outcome, it has become increasingly apparent that there exists an abundance of negative sentiment shared by many home owners who have been unsuccessful in selling their properties, despite trying for some time (up to a few years in many cases).
This negative view isn’t completely unwarranted. Resale properties do have stiff competition from new-builds. For anyone who lives in Phuket or visits regularly, the islands ever quickening property development is an observation difficult to miss.
The exhibition-like property stalls at Jungceylon Mall in Patong for example, perfectly reflect the ever growing supply of new developments here on the island. Everywhere you turn, there are new development booths popping up with pretty girls ready to tell you how quickly units are selling, and that they can guarantee rental returns for the next 10 years. Although for the most part, these overly optimistic claims are characteristic of many sales pitches, we do know of a brand new development in Surin that has successfully sold nearly 50% of their units within 2 months of launching. So without a doubt, there are certainly buyers coming to Phuket to invest in the property market.
So what are some of the main challenges the resale market currently faces?
Pricing is the number one factor among the key issues affecting property sales for resale villas and apartments. Homeowners who purchased their Phuket property many years ago have ridden the price highs and it can be difficult to accept the realities of today’s market. Many owners are not adjusting their prices in line with those of developments. We have private resale villas within a major development in Phuket where owners are asking for 20M THB upwards – when the developer is selling new inventory directly from only 13M THB.
Guessing a property’s sale price is no easy task without publicly available sales data or a trustful knowledge base, but one thing we can be sure of is that many resale owners are already pricing themselves well out of any potential investor’s calculation – to get the market moving the prices need to move first.
The condition of properties also significantly impacts the likelihood of a sale. A large number of resale properties we have visited were being used as holiday homes for 1 or 2 months of the year, some are 5 to 10 years old, badly kept and poorly furnished - many need a few hundred thousand baht worth of re-furbishing just to get them back to respectable living and rental conditions.
It is also significantly harder for resale owners to attract the islands top real estate agents who are incentivized by developments offering unrivaled commission rates of up to 13% of the sale value. Most property markets consider 5% commission to be on the high side; Jungceylon property agents with prime locations, and those agencies atop the search engines are driving most of their prospective buyers toward higher paying off-plan developments, leaving the resale properties further down the viewing list.
Despite the stiff competition from new developments, it’s not all doom and gloom on the resale front. From an investment standpoint, resale properties can receive rental bookings immediately and provide an instant return on investment. Properties that have been on the market a while usually have a log to show their historical rental figures. This plus proves favorable when compared to buying off plan where unit completion times can be elongated as delays occur. In addition, buying a ‘sold as seen’ resale property ensures the buyer gets what they paid for whereas completed units can occasionally look different to the renderings and show units seen while visiting a developer’s office.
Resale properties outside of developments also have the added value of uniqueness in comparison to the large number of identical units within developments. This can make them easier to rent and less susceptible to price wars from neighboring properties.
Another point to consider is that as land becomes scarcer within popular locations, developers are having to build smaller properties with smaller plots – this is one area where the resale market can come up trumps. Bigger properties, larger plots (typically bigger gardens) and also higher rental return figures all make resale properties an attractive option for investors.
From LivePhuket’s view point, buyers are coming, viewings are happening, both sensible and radical offers are being thrown around resulting in small but positive movements. Yes, the military coup, recent bad press and the Russian ruble decline have all had a part to play in what many have identified as a disappointing high /peak season in terms of visitor numbers and property sales.
Phuket may have lost a couple of beach clubs and restaurants but it still maintains its under-lying appeal to the masses. With the coming of the International Airport, Phuket is set to receive more visitors from more destinations than ever before. Its popularity and brand may have been dented, but it’s definitely not unrepairable.
All in all, we can safely say that while the resale market is tough, it is definitely moving and properties are exchanging hands but there is much work needed to bring resale prices in line with those of their newer counter parts.
This article was written by LivePhuket.com - For any questions you can contact (Brennan@livephuket.com), call the LivePhuket Office(+66 (0) 89 586 6734) or visit www.livephuket.com.