Hua hin property market booming, But it runs risk of overreaching

Hua hin property market booming, But it runs risk of overreaching

The other seaside destination to the south continues to draw buyers with its relaxed pace and beautiful environment, but Pattaya's broader appeal could result in oversupply amid the current building boom

Hua Hin is closely associated with Thai royalty, which has given the seaside town a unique and charming identity. The royal family put Hua Hin on the map as the country's original seashore destination after King Rama VII built his summer palace there. Just a little over two hours' drive along the coast, it has become a popular escape from Bangkok that is developing fast, but which retains much of its charm.

The beach itself is tranquil and the sea is crystal clear. The area is known for more than just sunbathing, snorkelling and swimming, however. There are may supporting attractions and activities including golf, spas, caves, waterfalls, shops, seafood and nearby national parks. Hence, Hua Hin has become an attractive place for second homes for Thais.

The town's infrastructure is well developed and includes supermarkets with international food, quality schools and a new branch of Bangkok Hospital. Condominiums are proliferating, while hotels in all ranges as well as retail services support the lifestyle of visitors and residents, including a large foreign retiree population. Just two weeks ago, The Mall Group announced plans to develop a five billion baht shopping complex including a Mall department store in the town, scheduled to open in 2014.

Unlike other resort destinations in Thailand, Hua Hin's second-home market is overwhelmingly driven by wealthy Thais. Development activity in Hua Hin and Cha-am has been especially brisk in the past two years, notably with the arrival of major developers from Bangkok, who have acquired many land plots for condominium projects.The total condominium supply of Hua Hin at the end of the first half of 2012 was 17,349 units. The figure included a much higher than average 3,956 units added in Hua Hin and Cha-am in the first half of 2011 alone.

Most condominium purchasers, around 75%, are Thais from Bangkok, with the rest foreigners who are looking for a beachside residence, either retired or working in the capital This trend is expected to continue.

There are two main categories of foreign buyers in Hua Hin: those looking for long-term residential and investment opportunities, and regionally-based expatriates from Singapore or Hong Kong, who are after holiday homes.

The latter group usually doesn't spend more than 10 million baht per unit as they generally come for only one month during the winter to relax and play golf.

The reliability and reputation of the developer tends to be the most important factor for expatriates, while an affordable price seems to be vital for foreign retirees.

Unlike their peers in other tourist destinations such as Phuket or Samui, the foreigners seeking property in Hua Hin are retirees or have Thai spouses, and tend to have more limited budgets. They prefer to buy a residence for their own use as a second home during their country's winter season.

As foreign ownership regulations in Thailand have become more stringent, foreigners who are looking for a residence are paying more attention to condominium units that they can buy on a freehold basis (up to 49% of the total ownership). Thus, they are likely to search for an inland condominium unit that has a lower price than a beachfront unit. This year many inland condominium developments have been taking shape. SET-listed Sansiri has established a major presence with projects including Ban Kunkue, Ban Khukieng, Summer and Ban Im-aim.

The historical take up rate for Hua Hin condominiums has been 1,000 to 1,200 units per year. However, during the first half of this year there were 1,655 units sold. Even so, the take-up rate dropped to 45% from 44% a year earlier, reflecting the large supply of new units on the market.

Previously, condominiums in Hua Hin were easy to sell if they were on beachfront sites or if the units offered views of the sea. Some of those developments have now become quite pricey as land plots are scarce. Recently, inland condominiums that are compact and affordable are selling easily.

The cumulative average growth rate of beachfront condominium units in South Hua Hin was 4.2% between 2010 and the first half of 2012, with a selling price of 138,010 baht per square metre. For those who have limited budgets, they can select the condominium in Cha-am, providing sea views, with the average selling price of 92,404 baht per square metre, or cheaper for units located far from the beach.

In many cases, lower unit selling prices reflect the trend toward smaller units overall. Previously the popular unit size for Hua Hin condominiums was two to three bedrooms, but now we can see many new launches of compact one-bedroom units with the size as small as 30 sq m. These units sell in the range of 1.5 million to 1.8 million baht each. They will be located far from the beach but some may have sea views.

The only risk in Hua Hin is that unlike Pattaya where the range of potential buyers is wider, in Hua Hin condominium buyers are still largely Thais looking for a second home. With the tremendous supply now emerging, developers should be aware of the risk of oversupply.


Risinee Sarikaputra is associate director of research and valuation with Knight Frank Thailand. For more inquiries, email: risinee.sarikaputra@th.knightfrank.com

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