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Phuket Property Market
Overview
Phuket has transformed significantly over the past few decades, growing from a lesser-known location to one of the world’s top vacation spots, known as the Jewel of the Andaman Sea. This popularity boost has led to continuous improvements in infrastructure and road networks, as well as an increase in new attractions, drawing more tourists and real estate buyers, many of whom now consider making Phuket their permanent home. The villa market has been particularly targeted by developers to meet the demands of the increasing number of foreign nationals moving there.
Property in Phuket is currently experiencing unprecedented growth, with new developments emerging rapidly, particularly inland where land is cheaper. This shift allows more people to afford modern luxury villas with private pools, appealing to those with smaller budgets. The trend towards buying homes rather than just vacation or investment properties has been notable, especially since the onset of Covid in 2020.
Where you will find the most expensive of Thailand’s resort properties, Phuket Island has the largest selection of exclusive high-end villas and condominiums and is particularly sought after by wealthy foreign investors. There is however a broad range of property types available, such as affordable apartments, townhouses and garden view estate villas, appealing to both international and Thai investors. According to Thailand Property, as of 1st March 2023, their mean condominium and villa listing prices were approx. 14M THB (avg price per sqm of 85K) and 18M THB respectively. Though entry level 2-bed villas in Phuket can be acquired for as little as 4M THB, at the super luxury end of the market, often priced in American dollars for the international market, villas can fetch up to 20M USD and beyond. Referred to as Millionaire’s Mile, the most exclusive area is on the west coast at Kamala Beach. This is generally where Phuket’s most expensive properties are located.
Trends & Outlook for Phuket Real Estate
Understanding the Phuket Property Market Dynamics
The Phuket’s property sector, along with other resort destinations, such as Koh Samui, stand out as distinct from Thailand’s broader real estate landscape, drawing vitality from international demand closely linked to its thriving tourism sector. Unlike other regions, many foreign investors in Phuket are typically introduced to the market following a vacation, though the actual purchase might occur months later. Rarely do international buyers invest without prior visits, highlighting the importance of first-hand experience in influencing investment decisions.
This correlation with tourism is clearly demonstrated by the revitalisation of Phuket’s real estate activities, following the uptick in post-pandemic tourism, reopening of borders to Chinese tourists and increasing Russian visitors and investment, following the war in Ukraine. Over the past two years, there has been a significant increase in activity, especially in the northern Cherng Talay area, which has emerged as a centre for extensive property developments. The scale of development in Cherng Talay is quite remarkable. New projects are rapidly emerging across the region, from Bang Jo to the areas around Blue Tree and Pasak, as well as Boat Avenue, Laguna, Layan, and extending to the previously secluded Manik area. These developments not only offer a wide range of options for potential buyers but also reach further inland, providing more affordable housing near top international schools—an advantage for families seeking both value and convenience.
The influx of Russian investors, spurred by geopolitical tensions and seeking safe havens for their capital, has very significantly buoyed the market. This, coupled with Thai government initiatives like new, extended visa programs – (see https://ltr.boi.go.th/), has broadened the appeal of Phuket’s property market. The availability of off-plan properties allows buyers to choose from a diverse array of new units tailored to various tastes and preferences, indicating a robust and forward-looking market poised for continued growth.
Impact of Global Events and Local Developments on Market Trends
The post-COVID-19 boom has notably revitalised interest in Phuket’s property sector, leading to a record-breaking increase in villa sales. CBRE highlighted that villa sales reached an all-time high in 2023, with over 400 units sold—quadrupling the average annual sales seen in previous years. Equivalent records were also set for the Phuket condominium market, with sales soaring to over 2,000 units. However, it should be highlighted that the period from early 2020 until late 2022 marked some of the lowest sales in the Phuket market’s history. This likely led to a significant build up of deferred demand, as numerous potential buyers aiming to purchase properties in Phuket were unable to do so due to travel restrictions. While a few managed to make purchases remotely, the release of this pent-up demand became apparent with the restoration of normalcy, triggering a notable surge in property transactions.
As noted by Ms. Prakaipeth Meechoosarn of CBRE (Thailand), the Sandbox program initiated in 2021, which permitted foreign tourists to visit Phuket without quarantining, significantly contributed to this uptick by boosting demand. This surge markedly escalated the demand for upscale properties, including villas and condominiums, while simultaneously highlighting a shortfall in supply. 2022 saw a significant uptick in villa sales. According to the Real Estate Information Center (REIC), villa sales increased more than fourfold from the previous year, with a remarkable spike in the latter half of 2022. The condominium market also showed robust growth, with transfers significantly exceeding pre-pandemic levels, primarily driven by Russian and Chinese investors, as noted by industry experts from Knight Frank Thailand. Consequently, this prompted numerous developers to initiate new projects, peaking in 2023. Notably, Russian investors, who represented 70% of the buyers, showed a preference for purchasing luxury villas priced between 20 to 26 million THB, as well as condominiums ranging from 5 to 10 million THB, as reported by the Bangkok Post. A deciding factor for these investors was the proximity to international schools and essential amenities, which are critical for those considering relocation.
In contrast, the Chinese represented the second-largest group of buyers, predominantly purchasing holiday homes and properties as rental investments. Following them, the Europeans formed the third-largest buyer demographic in 2023, with a particular interest in spacious holiday homes that also serve the rental market.
The continued influx of foreign investment, particularly from Russian nationals seeking immediate residential options due to increased European travel restrictions, underscores Phuket’s appeal not only as a vacation destination but also as a viable residential market. The recent inauguration of a Russian consulate in Phuket in July 2023 further cements the island’s strategic importance to this demographic, highlighting the dual appeal of its tropical allure and favourable investment conditions.
This heightened demand has spurred developers to expand their projects beyond the prime areas to cater to the burgeoning market, with smaller developments also contributing to the island’s growth. However, this rapid development pace raises sustainability concerns, especially in the Cherng Talay area, which is experiencing substantial urbanisation within its modest 14.3 square miles. Issues such as rising land prices, potential traffic congestion due to construction, and perennial water scarcity exacerbated by below-average rainfall are becoming increasingly pressing. Efforts to mitigate these challenges include drilling new groundwater wells and plans for a pipeline from Phang Nga province, aiming to secure long-term water solutions for the island.
Phuket Property – First Quarter 2024
According to Sopon Pornchokchai of the Thai Real Estate Research and Valuation Centre, source Star Media, reported by Star Media, the first quarter of 2024 marked a significant boost in market on the island with the launch of 25 new projects. These projects introduced 4,000 units valued at 54 billion baht, averaging 13 million baht per unit. Most of these new developments, worth 45 billion baht, were vacation condominiums primarily located in the Thalang District.
In the past year, Phuket’s real estate market has been robust, with 10,000 units sold, generating 90 billion baht, averaging nine million baht per unit. Vacation condominiums and villas have seen strong sales, while properties aimed at Thai residents have experienced slower movement. As of the first quarter of 2024, approximately 500 real estate projects are on the market in Phuket, comprising around 72,000 units with a total development value of 460 billion baht. Out of these, 62,000 units have been sold, leaving about 10,000 units available for purchase. This buoyant market highlights a strong demand for villas and vacation properties in Phuket, especially in the Thalang District, making it an opportune time for potential investors and buyers.
The real estate market is witnessing a rising competition between off-plan property sales and the secondary marketplace. According to C9 Hotelworks, from January through April 2024, resales accounted for 68% of transactions, indicating a substantial shift in buyer preference compared to the same period last year when primary and secondary sales were evenly balanced. This shift is even more pronounced for single-family homes, where resales now make up 70% of transactions.
While condominium sales remain robust, transaction values have decreased by nearly a third, with entry-level units and midscale developments experiencing the highest demand. Single-family home transactions in the secondary market are surging, albeit with lower sales values due to lower-priced resales. This dynamic is expected to create pricing pressures, compelling developers to compete with resales.
The top international markets for Phuket condominiums in early 2024 were Russia, the UK, the US, France, Australia, and Italy. For single-detached homes, the leading buyers came from the US, the UK, Russia, Australia, Italy, the Netherlands, France, and other Eastern European countries. Notably, India has emerged as a growth market. On the domestic front, the Thai segment has continued to post gains across all property classes this year.
However, there is concern among developers about the potential slowing of demand from Russian buyers as Phuket moves out of the peak winter holiday period. Additionally, the strict enforcement of laws prohibiting the use of nominees within Thai companies by foreign investors to own freehold villas in Phuket has caused a shift towards leasehold villas and freehold condominiums, which allow direct ownership. The extent of this shift remains to be seen.
With a growing number of new properties expected to be completed throughout the year, mostly at premium pricing points, there is an increasing gap between the values of new developments and older properties. This is anticipated to create upward pressure on the pricing of new developments and foster a more competitive market driven by the expanding secondary sales landscape.
For those looking to invest in Phuket’s property market, now is an ideal time to explore opportunities, particularly in villas and vacation properties. The market dynamics suggest strong potential for appreciation, especially in prime locations like the Thalang District. Whether you are interested in a vacation condominium or a single-detached home, the diverse range of options and favourable market conditions make Phuket an attractive destination for real estate investment.
Phuket as a Hub for Digital Nomads
Phuket has carved a niche for itself as a premier destination for affluent digital nomads, a trend accelerated by the introduction of extended visa options that cater to this modern workforce. The island’s idyllic climate, advanced infrastructure, and top-tier educational institutions make it an attractive locale not only for leisure but also for professionals who are free from the constraints of traditional office spaces. These professionals are drawn to the island’s high-quality co-working spaces, reliable internet connectivity, excellent amenities, and a variety of recreational activities, which make balancing work and life in Phuket an appealing prospect. The positive impact of digital nomads on the Phuket property market is tangible. As the global work landscape evolves, Phuket continually reinforces its reputation as an ideal spot for those looking to merge productivity with relaxation. This demographic’s growing interest has directly influenced property transactions in the region, with many seeking residences that serve both as a home and a remote workspace. This trend underscores Phuket’s strategic positioning not merely as a tourist hotspot but also as a global work hub.
Escalating Property Prices in Phuket
The rising property prices in Phuket reflect a significant economic trend driven by multiple factors, including a notable increase in land costs and a shortage in supply amidst robust demand. Data from the Real Estate Information Center (REIC) indicated a 24.5% year-on-year decline in available housing in the latter half of 2022, highlighting the tightening market conditions. Additionally, according to Knight Frank Thailand, land prices in Phuket in 2023 soared to more than 14 million THB per rai, representing a 20-30% increase from the previous rates of around 10 million THB per rai.
This surge in land and property prices has also been reflected in the cost of villas and condominiums. For instance, while some new condominiums were available in 2023 for around 100,000 baht per square meter, others have seen prices doubling—a phenomenon that was nearly unimaginable just a couple of years ago. This price inflation is partly due to the market rebound post-COVID, but it has now clearly surpassed pre-pandemic levels. Real estate agents and stakeholders in the the island’s real estate scene agree that the current spike in demand and pricing, especially for prime new builds, is unprecedented and indicative of a long-term bullish market. The luxury villa segment, in particular, witnesses the highest demand, with real estate agents observing substantial price increases across the board. These trends are a testament to the strong market fundamentals and the high level of investor confidence in Phuket’s real estate potential, making it a lucrative area for investment and property development.
Interplay Between Global Interest Rates and the Phuket Property Sector
The relationship between global interest rates and the Phuket property market is a critical aspect to consider. While rising global interest rates typically dampen enthusiasm in many property markets due to increased borrowing costs, the Phuket market remains resilient. This resilience is largely due to its unique cash transaction model, as foreign investors are generally unable to secure mortgages from Thai lenders. This results in a predominance of cash-based acquisitions, with the intricacies of foreign ownership through Thai companies further complicating access to financing.
Despite these challenges, the Phuket market continues to thrive. The ongoing low global interest rates have encouraged some investors to switch assets from low-yielding bank deposits to more lucrative property investments. Phuket, with its appeal as a tropical haven, further attracts investment, contributing to a noticeable increase in demand for studio and one-bedroom properties. These units are particularly sought after for their superior rental yields compared to traditional bank savings, making them attractive investment opportunities. The potential for high rental earnings and asset appreciation continues to draw significant international interest, driving the market’s growth and potential for property value increases.
Shift in Market Demand to the Luxury Sector
A pronounced shift in the Phuket market has been observed, with a growing pivot towards the mid to high-end segments. This trend, highlighted by sources like Business Insider, marks a stark contrast to pre-pandemic patterns, which focused predominantly on entry-level price brackets. The emergence of buyers who are less price-sensitive has shifted demand notably towards the luxury sector. In this domain, market dynamics have transitioned to a seller’s advantage, eliminating the frequent need for price reductions that were common before. This current trend is not only a reversal from the previously dominant affordable entry-level market but also a move towards growing interest in both midscale and upscale luxury segments. Developers are now responding to this increased demand by venturing into constructing luxury villas on terrains previously considered unsuitable, thereby expanding the geography of the Phuket property market. These new luxury developments are strategically placed, ensuring that despite Phuket’s compact size, residents are never more than a 30-minute drive from pristine beaches and the scenic Andaman coast, enhancing the attractiveness of these properties.
Lands once dedicated to agriculture are being transformed into upscale housing projects, catering to a clientele that values exclusivity and premium living spaces. This expansion into luxury housing is driven by the continuous influx of high-net-worth individuals and investors looking for high-quality, luxurious living options that offer both lifestyle perks and investment returns.
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Notable Areas for Luxury Property in Phuket
As is typical of any beach resort destination, the Phuket’s property market develops geographically according to proximity to the best beaches, and Phuket and its proliferation of development on the West Coast is no exception. The allure of the Andaman Sea and pristine beaches in areas like Kamala, Bang Tao, Patong, Karon, and Kata have historically made this region a focal point for hotels, resorts, and high-end real estate. With the rise of branded real estate in Phuket, the lines between hotels and real estate have also blurred, as international hotel brands increasingly integrate residential properties into their offerings. However, rising coastal land prices and limited availability in these prime locations are driving expansion into new parts of the island. This is particularly evident in the Thalang district, for reasons such as proximity to the airport and superior infrastructure. As the profiles of luxury property buyers diversify, factors such as value for money, proximity to amenities, and access to schools are becoming increasingly important alongside traditional preferences for beachfront locations. In this dynamic market, sustainable inland developments are also gaining momentum, offering eco-friendly designs and spacious living while preserving Phuket’s natural beauty…Read More
Legal Structures for Foreign Investors in the Phuket
In Phuket, as per Thai laws, foreign property investors are required to adhere to specific legal ownership guidelines. Notably, foreigners are prohibited from owning freehold land directly in their name. As a result, those interested in Phuket villas must approach ownership in one of two ways: either the freehold of the villa is held within a Thai company, where the foreign investor maintains a controlling interest, or the property is acquired on a leasehold basis. On the other hand, the landscape shifts when considering apartments and condos. Uniquely, freehold condominiums in Thailand possess a distinct legal status that permits foreigners to register the freehold directly under their name. However, for apartments that do not carry this freehold condominium status, foreigners can either opt for a leasehold arrangement or acquire ownership through shares in a Thai company. For more details, see Legal & Tax Thailand
