SECTION 15: WHY INVEST IN PHUKET REAL ESTATE? A LOOK AT ALL THE POSITIVES
The Positives of the Phuket Property Market
The vast majority of buyers in Phuket today have a positive outlook on the property market, and it is easy to see why. But even the sunniest day has a few clouds, and although every cloud may have a silver lining, it is first and foremost a cloud.
There are a number of positive key drivers ahead for the Phuket real estate sector, but in the following section we will also examine the potentially negative ones. If the economic storm clouds do blow in, we hope this information proves to be an effective umbrella.
But first, lets take a look at all the positive aspects for those contemplating a Phuket property purchase !
Looking at the World Through Rose-Coloured Spectacles
Phuket Has a Far More Stable Real Estate Sector
As discussed previously in this guide, there is little to no borrowing in the foreign property market in Phuket, which is generally a positive for the market as a whole.
A credit crisis typically inflicts the greatest immediate pain on the property sector. If borrowing were available to foreigners, Phuket property would probably see a boom like no other. Like most booms, we would expect it to be followed by a speculative bubble and a painful crash.
While it may be possible to secure a loan from a Thai or foreign Bank in Singapore, this is extraordinarily rare. No borrowing means no leveraging of loans, which in turn means less speculation and greater stability.
Thai nationals, on the other hand, can and do get mortgages, but the developments which target Thais are not necessarily the same one’s being marketed to foreign buyers. We do know of a handful of foreigners married to Thais who have managed to get mortgages, and we know of some wealthier Thai nationals who have borrowed to purchase property in predominantly foreign owned resorts. These are exceptions to the rule.
With a restriction on borrowing, Phuket is able to smooth out the peaks and troughs normally found in other real estate markets around the world. At the same time, rather than being wholly dependent on the strength of the Thai economy, there is an entire segment of the Phuket property sector which, in many way, follows more closely western economies, including US or European interest rate shifts and/or currency movements.
The Positive Effects of Inflation on Real Estate
Inflation can negatively impact certain sectors of the economy (see “The Negatives” mentioned in the following sections), but generally it is good for house prices.
The global economic phenomenon of money creation we have experienced since the 2008 credit crisis is basically Economics 101, telling us that all the newly created money chasing the same amount of goods is inflationary.
The main driver of this was the post-2008 quantitative easing in the United States, which flooded the global economy with trillions of dollars. Money was created out of thin air, and it had to go somewhere. Much of it went into global stock and property markets.
Thailand was not really party to the creation of this global liquidity, but it was certainly a beneficiary of it.
Investors from around the world came to buy Phuket property, and increased demand (especially recently), coupled with all the additional money sloshing around the system, has driven the price of property higher. It is worth pointing out that these price increases have never been excessive, as other factors have kept Phuket from entering bubble territory.
Higher prices are nevertheless welcome for anyone who has bought during the last few years, as they have very likely seen the value of their property increase significantly.
Demand for Phuket Residential and Investment Properties Remains High
The increase in demand we have seen over the last three years has been fundamental in bolstering the Phuket real estate market. As we near the end of 2024, this demand trend which began after the pandemic, does not appear to be abating. If anything, it seems to have been accelerating, and has led to a faster than normal rise in prices. Over the past 24 months, both villa and condo prices have certainly been on an upward trajectory, at first only in high demand areas, but this now appears to be an island wide phenomenon.
Of course, demand on the west coast of Phuket has always been consistent, and has always seen the most sales activity. There is no reason to think this will change. The lure of the west coast beaches and crystal clear waters in the high season, will always attract more buyers than further inland, or on the east coast.
However, this increase in demand has also led to new villas being built on land that was once viewed as only fit for agricultural purposes. What was once a pineapple field, rubber plantation, or even a buffalo pasture, is now a high end luxury villa estate. These new slightly isolated projects are likley to create new communities and will further lead to improvements in infrastructure and amenities in the area.
The consistent stream of new foreign residents moving to Phuket is unquestionably a major factor in the demand we are currently experiencing. Phuket now has 14 internationals schools, testament to the number of families with children now living on the island.
Retirees will always be a major component of residents on the island, and it is easy to see why foreigners would like to spend their retirement years in Phuket. But over the last few years we are also seeing a rise in “digital nomads”, who are also driving demand. Technology over the last few decades has transformed the world we live in, which has given many people the choice of where to live and work. It makes sense that anyone whose profession allows them this choice would much rather live on a beautiful tropical island than in a cold wet rainy city.
For a small country, Thailand has a remarkable tourism industry, and anyone who has been captivated by Thai culture, Thai food and the friendliness of the people can easily see why. Maybe we are biased, but we believe the official slogan “Amazing Thailand” is well deserved.
Thailand is consistently among the top countries in the world in terms of revenue generated from tourism. In fact, in 2023 it generated US$ 57.5 billion, which the authorities hope to surpass in the not so distant future. The tourism industry has been growing steadily year-on-year, and currently contributes circa 20% to Thailand’s GDP – nearly double the global average.
Clearly this is an extremely important component of Thailand’s economy as well as being a key driver for the Phuket property market.
Number of Arrivals
The high season, which typically begins after the first full moon in November (or coincides with the Loy Kratong holiday) and ends around April/May, is when the tourism sector is in full swing. In 2019, Thailand welcomed around 38 million tourists, and around 28% of them visited Phuket. During December, January and February of that year, nearly 1 million tourists per month arrived on the island. We are not quite back to those numbers yet, but arrivals have been increasing year on year since the island opened up for business again after the pandemic.
The low season (or green season as it is also known) after May always sees the numbers drop off. While the median net worth of each visitor maybe lower than those who visit the island in the high season, the figures still make a solid contribution to the island’s revenue.
The number of tourists visiting Thailand has been climbing steadily over the last 20 years. In fact, the last time we saw fewer than 10 million visitors in a year (excluding Covid) was in 2001 after the 9/11 terrorist attacks. Since then, tourism has grown at a staggering pace, from an average of 10 million per year in the early 2000s to nearly 30 million visitors today.
What Tourism Means for the Local Phuket Economy
Over 15% of total employment in Thailand is attributed to the tourist sector. When it comes to resort islands such as Phuket or Koh Samui, that percentage becomes demonstrably higher. In Phuket, for example, over 35% of everyone employed on the island is in the hotel or restaurant business. Adding the workers whose jobs are linked to, or dependent on, the hospitality sector takes that figure even higher.
What Tourism Means for the Phuket Property Market
The pertinent question to ask here is whether the real estate sector would be where it is today without tourism. The answer is obvious. The real estate sector relies heavily on tourism.
Tourists are the fuel that keeps the property sector burning. Without the foreign market, the fire would almost certainly be reduced to embers, and the property sector would be forced to undergo a transformation.
Phuket’s Shifting Demographics
Phuket Population Growth
Even without the foreigners who have decided to make Phuket their home, Phuket is experiencing strong population growth (7.4% annually). This is much higher than most other regions of Thailand, and is mainly down to the relocation of Thai nationals. For the broad property sector in Phuket, this is undoubtedly a key driver.
It is a global trend, dating back centuries, which has seen people (especially the younger generation) move from rural towns and villages to cities or wealthier provinces. This demographic shift inevitably buoys the local economy, including the property sector. While the primary impact of this population growth is on the local property market, older affluent Thais are also buying luxury homes or condos in Phuket, in modern western-style developments.
This influx of new residents will buoy both foreign and local developments, the latter being extremely popular among middle class Thais and foreigners married to Thais (who don’t necessarily want to live near the centres of tourism). Demographic shifts related to the tourist market (i.e. the changing nationalities of both holiday-makers and foreign residents) are discussed in later sections.
Thais Marrying Foreign Nationals
It is no secret that there are foreigners who come to Thailand to find a Thai wife. This trend is not slowing, and obviously creates another dynamic within the Phuket real estate market.
Should the couple decide to live in Phuket, and purchase a home here, this would be a boon to the real estate sector (and to the economy as a whole) because the capital to fund the purchase would typically be transferred into Phuket from overseas.
An Ageing Thai Population
Thailand, like many countries, has an ageing population. According to the 2024 United Nations figures, Thailand has the 5th highest number of centenarians (those who live to 100 years of age or older) in the world. This is a remarkable statistic, considering that Thailand’s population is miniscule compared to the top four, these being Japan at the top, then the United States, China and India. This is a factor of diet and lifestyle, and it points to Phuket as a great place in which to grow older and remain healthy.
But as in Japan, where people are living longer and having fewer children, it raises the question of how the future generations will care for their ageing citizens. In Phuket, for example, nearly 10% of all Thai nationals are over the age of 60. If this trend continues, it could have a significant impact on property dynamics.
Historically, the elderly in Thailand live with their children. If fewer children are being born, the new challenge will be how Thailand (including Phuket) will provide housing for the growing elderly population.
There are a number of developers and entrepreneurs aiming to tap into this market by planning modern retirement villages in Phuket, which will offer services equivalent to a western care home. This niche market is certain to be popular with individuals who require some level of care as they get older, but prefer the warm tropical weather of Phuket to their own cold and rainy country.
Phuket’s Shifting Social Trends
People’s tastes and desires shift over time, often influenced by outside factors such as television or social media. Social trends are sometimes short-lived, disappearing as quickly as they emerged, but in the context of property we are talking about major societal changes which occur over time.
Looking back over the last 50 years, the Thai residents of Phuket lived predominantly in typical Thai style houses. Many Thais are now living in larger structures, more western in appearance and design, or even in luxury villas. Many younger Phuket nationals are living in condominiums, townhouses, or in gated housing estates. In other words, the demand for new modern houses was not driven solely by foreign buyers, but it obviously contributes to the number of developments which target a mix of foreigners and Thais.
These changing tastes have been a direct result of greater contact with and influence from other countries, and the increased prosperity that globalisation has brought to Thailand. It did not happen overnight, but certainly in Phuket the stark contrast in architectural styles of 50 years ago, compared to the more contemporary looking styles of today bear witness to this changing trend.
Key Drivers for the Phuket Property Market Articles
SECTION 15: Why Invest in Phuket Real Estate? A Look At All the Positives
There are many reasons why people fall in love with Phuket. Although the world is made up of a diverse range of people, everyone who visits Phuket begins their immediate love affair with this enchanting island. Today, the island comprises of a broad range of nationalities, possibly having nationals from pretty much every nation on Earth. Whatever their reasons for investing in, or even becoming residents of the island, nearly all of these people that come to Phuket have a positive attitude towards owning property here. This section covers all the positives associated with Phuket property sector right now, in 2024.
SECTION 16: Phuket’s Ongoing Infrastructure Improvements
Phuket was once an island covered in jungle, with fishing villages dotted around the coastline, and with Phuket Town servicing the tin mining industry. Since the 21st century began in earnest, the island has seen incredible expansion, in both population growth, as well as incredible infrastructure, with new attractions and amenities springing up every year. As the world adjusts to the post Covid era, with more tourists arriving and with more Thais and foreigners calling Phuket their home, this infrastructure improvement program is unlikely to ease off or slow down.
SECTION 17: Phuket’s Negatives – Taking Off The Rose Coloured Spectacles
Although the Phuket property market tends to move independently of every other real estate market in the world, including the rest of Thailand, (except perhaps Koh Samui), it has not always been smooth sailing. Without the excessive borrowing seen in most countries, it has certainly been a much smoother trajectory, without any booms and busts. However, the real estate sector in Phuket has historically gone through many slowdowns, where prices have stagnated for many years, as demand waits to pick up to soak up any supply excesses. This section covers what to keep an eye out for in the years ahead, allowing investors to plan accordingly.
SECTION 18: The Black Swans of Tourism
This topic deserves its own section, mainly because the tourism sector has always been, and still is today, the lifeblood of the island. Without tourism, Phuket would have never seen the prolific growth it has experienced over the past 30 years, nor would the Phuket property market have reached where it is today. But unforeseen events do occur every few years, sometimes quite suddenly and cannot be discounted in the future. These may be local, national or international, but many do end up having an adverse effect on Phuket Island and its economy.
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