Global investors seeking yield producing assets are finding it harder and harder to find consistent returns. Trying to identify the perfect risk-return assets just isn’t as easy as it used to be. Certainly, traditional investments aren’t as attractive as they were prior to 2008, and this is why investors are looking further afield.

One sector that visiting investors have honed in on, is Phuket’s real estate market, which has become a popular place for investors seeking income producing assets. As the island continues to rapidly modernise and make all manner of infrastructure improvements, investors from Asia, and across the world seek to capitalise on this dynamic.

The island has become not only a vacation hotspot, but also as one of the eastern hemispheres most exhilarating real estate sectors. So much so, that this combination is also creating an extremely attractive yield producing opportunity for investors.

Investors are always looking at new ways to grow their money. There is certainly a huge choice out there, and some of it can be confusing and daunting to the layman. As overwhelming at it can be, in the current global macro environment, people have to make these choices. This is mainly because leaving money in bank deposits or in bonds/treasuries doesn’t even protect that money from the risks of inflation.

As investors look at all the choices, what are the important factors to consider? For the most part, they want security, capital growth and income. But what if there were other advantages too?

The Attraction of Future Free Vacations

Because Phuket is such an incredibly picturesque island, the vast majority of buyers are simply captivated by its stunning beauty. Not only can they see the massive potential it holds, but they also know that if they purchase a foreign freehold Phuket condominium on the island, they also have somewhere to stay on their future vacations.

In fact, most Phuket investment condominiums offer a rental program whereby owners are allowed a certain amount of days to stay in the condo unit each year. This can be anywhere between 15 days and as much as 45 days depending on whether it is in the peak season (December to April) or the off-season, which tends to get more rainfall (between May and November).

Therefore, those that purchase a Phuket condo for predominantly investment purposes, not only look at the fact that they are getting their money working harder for them, but also the fact that they are going to have free vacations indefinitely.

Why Foreigners Buy Condos in Phuket Over Villas and Houses 

Like many developing nations across the world, the laws of Thailand states that foreigners may not directly own land. Although there are means to get around this, it is not clear cut, but is obvious that the Thai Government would prefer that foreigners did not try and flaunt or circumnavigate these laws.

Foreigners can however, since 1979, own a condominium in their name with a freehold title. In fact, every condominium constructed in Thailand may sell 49% of ever the unit space to non-Thai nationals, provided that the remaining 51% is owned by Thais.

This means that many individuals, from a wide variety of nationalities are taking advantage of this freehold offer, as well as being attracted by the excellent investment opportunities available. Free stays for some of the year and the means to generate a solid income, is predominantly the main reason why people continue to invest in Phuket condos.

Phuket Real Estate as a Stable Investment

Because the condominium market in Phuket has limited borrowing facilities available for foreign buyers (they do exist, but with very high rates of interest), Phuket real estate has very little volatility when compared to other conventional markets around the world. With no borrowing and no speculation, and with cash only buyers moving the market, there are no booms and busts, peaks or troughs, or even market crashes, as seen in other highly leveraged property markets.

That means that nearly every Dollar, Euro or Pound used to buy real estate is brought into the country in the form of foreign currency. In fact, this is a stipulation under condominium legislation for foreign buyers. Section 19 of The Thai Condominium Act states that a foreigner must remit all of the purchase price of the condominium into Thailand in the form of foreign currency.

The Potential for Capital Gains from a Condo Investment 

Although Phuket has very little volatility, it is still an island with limited land supply, and is also prone to the same inflationary pressures forced on all tangible assets. The effects of this, such as the higher cost of raw materials and labour, means that Phuket real estate prices just keep steadily rising.

With any investment, there is no sure-fire way of knowing whether it will grow in value over time. However, as alluded to above, in many global real estate markets, bubbles often form, then go pop. But the same cannot be said for the Phuket real estate. Apart from the anomaly of the post-Covid era, prices in Phuket are nowhere like the roller coaster ride found elsewhere, and tend to creep up in line with inflation, without any major downturns.

Even during the coronavirus situation from 2020 onwards, prices held firm and did not see any significant declines in values, mainly because owners had no debt to service.

Irrespective of how prices ebb and flow and how demand and supply fluctuate year on year, one thing is certain. Anyone purchasing a Phuket condo with a long-term outlook will definitely see their investment increase in value over a 10 year timeframe, especially on an island where land is a limited resource.

Phuket Condos Offer Excellent Income Opportunity

Although bank deposit rates have been on the rise since 2021, they are still not attractive to most investors. The main reason for this is that the cost of living is rising faster than the paltry returns achieved by leaving money on deposit, which means that inflation is, quite simply, eating away at money left in the bank. The lure of superior returns being offered in Phuket is certainly working. Purchasing a Phuket condo as an investment property is perfect for anyone seeking returns that outperform what the banks are offering.

Owning real estate has always been a great income producing tool. Most real estate investors around the world rent their property out on a monthly basis, so that they have long term tenants, but in Phuket, because it is one of the worlds’ top vacations hotspots, rents are more likely done on a daily basis, which increases the potential income significantly.

Certainly, buyers must be aware of the laws associated with short term rentals, and it makes sense to own a condominium unit which has full hotel licenses and is managed by a professional brand name.

Depending on how long you intend to own your property, it is also worth mentioning that the longer you own it the more lucrative it becomes. This is because rental incomes will also be subject to inflationary forces. Therefore, as rental incomes increase year on year, buying a condo today and holding it for  for the long term, your yield will gradually rise in the years ahead. If over the next 10 years your income increases by twofold, then your 6% return will become a 12% return based on your original purchase price.

Guaranteed Returns Are Also Offered by Condo Developers

Many developers offer investors guaranteed returns when they purchase a Phuket investment condo. This can be anything from a period of 3 years and even up to as much as 5, or even 7 years. Returns range from 5% per annum up to 8% per annum.

In the current environment, the off-plan projects (those that are still in the construction process) are also rewarding investors with “cash-back” offers. This is when the developer pays the investor a return on the investment throughout the construction process, normally for one or two year period until completion.

The Security of Owning Real Estate 

Firstly, and probably the most obvious reason why people invest in real estate, is that you actually own something tangible. It’s a real asset. You can touch and feel it, you can sleep in it and live in it. You own the bricks and mortar and a land title too. And if it comes with a freehold title, it’s yours forever.

And while no investment is absolutely immune from risk, the real estate sector trumps other investments because you always have a physical asset to sell. Unlike stocks, your condo is not governed by earnings reports, be subject to fraud, or be de-listed. Sometimes when investing in stocks, you can be left with nothing.

With real estate, you always hold something of value, no matter what the future holds. And if you make sure that you follow the correct procedures, buying real estate in Thailand is as safe as anywhere.

Owning a Condo is Also a Hedge Against Inflation

Throughout history, owning real estate has given people protection against the erroneous effects of inflation. Everything we buy on a day to day basis (minus some unusual goods and services) increase in price gradually year on year. Putting your money into real estate helps to counter the effects of these rising prices.

On average, and certainly in most stable countries around the world, the value of real estate has not only kept up with inflation but it has also outpaced inflation. This is not only rewarding for investors but it also provides a perfect hedge against inflation, which means your money holds its value against the increase in every day prices.

Summary

When you further consider that the success of this island has led to massive infrastructure improvements and a huge amount of private investment into tourist attractions, it becomes very clear why investors are flocking to put their money into this small island paradise.

This article has explained why the amazing island of Phuket has been attracting so much investment over the last decade or more. We expect this to continue in the future, irrespective of the occasional hiccup along the way.

And history has also taught us that real estate is one of the safest investments over the long term, especially in highly sought after destinations across the world.

To summarise why Phuket will remain so popular: 

  • Phuket is a dream vacation destination for tourists
  • It has a rapidly improving its infrastructure
  • The islands tourist sector is growing exponentially
  • Foreigners may own a condominium with a freehold title
  • Investors also get free future vacations
  • Real estate has always been a safe and secure investment
  • Real estate can keep pace or even outpace inflation
  • Phuket condos offer excellent income producing opportunities
  • Developers offer investors guaranteed returns