With rubber prices falling again, the property market and residential demand in the southern provinces now depend on government investment in infrastructure projects.
Sureeratana Luckananit, senior director of the southern regional office of the Bank of Thailand, says the property market in the key southern provinces improved in the first quarter as the developer sentiment index rose alongside the number of visitors to residential projects.
The increase was attributed to growth in export value in the first quarter, driven by a rise in rubber prices.
But rubber prices declined again last week.
"The property market is now depending on the government's megaprojects to boost the provincial economy and purchasing power," Mrs Sureeratana says.
Agriculture is the most significant economic sector in the South, accounting for nearly a quarter of gross regional product, with rubber the main contributor.
"In the region's agricultural sector, revenue from rubber contributed over two-thirds," Mrs Sureeratana says. "Rubber price movement affects the region's economy, purchasing power and the property sector."
The property market in the South has slowed since 2014, in line with falling rubber prices starting late that year.
The Real Estate Information Center (REIC) says land allocation permits in the South have declined since 2014, with 6,365 permits that year and only 1,110 permits last year.
The number of low-rise residential (single detached house, townhouse and semi-detached house) construction permits issued dropped from 33,209 units in 2014 to 31,015 in 2015 and 28,150 in 2016.
Housing transfers in Phuket, Songkhla and Surat Thani dropped in 2016 by 17.8%, 8.9% and 19.5% to 6,333, 5,958 and 3,768 units, respectively. Transfers of low-rise houses and condos in the three provinces dropped, except for condos in Phuket, which rose 18%.
But Nakhon Sri Thammarat saw an increase in housing transfers with 3,011 units last year, rising by 65% from 2015 as the province had a low base in the housing market.
The REIC's residential market research on Phuket, Songkhla, Surat Thani and Nakhon Sri Thammarat provinces found the combined value of new mortgages there last year accounted for 68% of the total amount in the region, led by Phuket with 10 billion baht, accounting for 22%.
Songkhla came second with 9.7 billion baht, followed by Surat Thani and Nakhon Sri Thammarat with 6.1 billion and 6 billion, respectively.
Siriwan Phongsermsuk, president of the Songkhla Real Estate Association, says the property market in Hat Yai, a key residential market in Songkhla, will continue growing as there are several infrastructure projects planned for the city.
These include a motorway between Hat Yai and Dan Nok immigration checkpoint in Sadao near the Thailand-Malaysia border, spanning 63.5 kilometres with a cost of 30 billion baht. Construction is scheduled to start in 2020 and it is due to open in 2022.
A double-track rail from Surat Thani to Padang Besar is also planned with a distance of 321km, passing through Hat Yai, a new deep-sea port in Chana district, an expansion of the Hat Yai airport and a bypass from Hat Yai to Sadao.
Rubber City, a new rubber industrial estate on a 1,218-rai plot in the Chalung subdistrict of Hat Yai, is slated to open this year. It is expected to draw new investment for at least 70 factories over the next five years.
"Rubber City and the special economic zone development plan in Sadao will boost the province's economy and create new residential demand in Hat Yai," Ms Siriwan says.
Piriya Tanerananonth, chief executive of Surat Thani-based property developer Baansuay Group Suratthani Co, says Surat Thani is the region's economic and logistics centre because of its location and gross provincial product, which ranks second in the region.
Tourism is a key sector driving Surat Thani's economy. The sector's revenue contribution rose from 54% in 2006 to 61% in 2015, he says.
The Phunphin district in the province is a key logistics area where the warehouses and hubs of large firms such as CP All, Thai Beverage, Tesco Lotus, Pepsi-Cola Trading, Haad Thip, Green Spot, Nestle Waters and Guangken Rubber are located.
"The electric train planned from Surat Thani to Thanoon in Phangnga province, with a distance of 131km and investment of 36 billion baht, will help promote the tourism industry in the southern provinces," says Mr Piriya.
Boon Yongsakul, president of the Phuket Real Estate Association, says tourism is the main contributor to the province's economy, with more than one-third of its gross provincial product from hotels and restaurants.
"Phuket should be developed as one of the world's key tourist destinations as the number of tourist arrivals rises every year," he says. "Infrastructure on the island should be improved."
The government plans eight new infrastructure projects for Phuket with a total investment of 36.7 billion baht. The largest is worth 24 billion baht -- a 60km light rail from Thanoon to the Chalong intersection.
The province also projects to spend 2.7 billion baht during 2017-22 to increase passenger capacity at the Phuket airport to 18 million a year from 12.5 million.
Mr Boon says 25 business people in Phuket last year set up the Phuket City Development Co (PKCD) with registered capital of 100 million baht to cooperate with the public and private sectors in developing Phuket.
PKCD's master plan for 2017-26 comprises four groups and 12 issues. Group one encompasses city planning and rehabilitation design, which will include transport, transit-oriented development and an ocean marina.
Group two covers infrastructure and utilities development, including alternative electricity supply and water supply management.
Group three's goal is to develop the city to be one of the world's leading tourist destinations by developing tourism applications, promoting tourism and property, holding the Asean Expo in 2025 and developing landmarks.
Group four aims to make Phuket a smart city by installing smart lighting and developing smart safety and a knowledge repository system.
"We got the idea from the Khon Kaen model," Mr Boon says. "We're waiting for [the government's budget], but it may be too late as Phuket's growing immensely."
