Demand for rental properties rises in Phuket

Property investors looking to secure their place in the sun on the picture postcard perfect island of Phuket off the coast of Thailand remain on safe ground.

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Despite it being 10 years since demand for properties outstripped supply, the market for villa and condominium rentals remains strong, while estate agents have developed rich revenue streams thanks to their entry into the property management market.

However, the market is experiencing a reduction in the number of small, low-priced condominiums on offer and developers are reporting an increase in the number of purchasers who are defaulting after completion.

Part of the blame for this is the dispute over land encroachment at Sirinat National Park, which pitched two state agencies into a legal conflict.

Phuket’s complex leasehold laws, which make it more difficult for non-Thai nationals to purchase property on the island, have not had a major impact on foreign investment. However, the volatile nature of the currency has deterred some groups of investors, with the level of interest from Russia showing a marked decline.

The journey that Phuket property has taken is no different to any other market and many would choose to show their delight at the fact that there is not wide financing available to those property buyers from overseas which has put a cap on speculation. However, the current government have shown signs of their intentions when it comes to increasing the lease terms or encouraging foreign ownership but it would be easy for some to believe that this has eased off for the time being.

There have been investment-type offerings lately that have promised guaranteed returns and these are also likely to disappear but with the increase in hotels in Phuket, the model is not sustainable and this means that the products are unable to keep up with what these hotels have to offer. Once the guarantees disappear and the hotels increase their pace to keep up with rates, buyers will experience a real downfall.

Over the next few years it seems as though owning or renting is the way forward and when the price is right the opportunities will arise. For brokers looking to fine-tune their business models in an industry that has peaks and troughs, a level of diversity could be useful. For more information on investing in Thailand, contact The Overseas Investor.