Phuket holiday homes downsizing
More condos and villas aimed at investors resemble hotels
It is becoming more evident Phuket is transforming itself from a pure vacation island into an investment destination of choice, especially when the number of international tourist arrivals to Phuket now exceeds 3 million annually.
Recognising changes in demand and customer profiles, condominiums and villas in Phuket have been adapting to meet buyers' needs.
As growth in the tourism industry accelerates -- current difficulties aside -- opportunities for short-term rental of condominium units and villas have also increased. This has been encouraging developers to adopt a different approach and transform what used to be large condominium and villas into something smaller -- more like a standard hotel in terms of sizing and furnishings.
The majority of Phuket's future condominium supply consists of small studio and one-bedroom units priced below 8 million baht per unit. Mid-range to luxury future supply is often one- to two-bedroom units priced between 10-30 million baht. Similarly, most of the future villa supply is in the lower end of the market priced below 35 million baht, which is also the most in demand.
To entice investors, developers have been bringing in hotel brands to increase the attractiveness of their projects, improve their condo and villa projects and upgrade their rental management programmes. These brands often take a large share of rental revenue, especially if they are established.
The revenue-sharing percentage of each property type can differ when calculated either by gross or net yield. Generally, rental programme terms are often split 60% to 40% by net revenue between the owner and operator, respectively.
An established operator may take a larger revenue share, sometimes up to almost two-thirds of net revenue. This is justified by covering additional costs that are normally due on the owners' behalf, such as renovation fees which are charged perhaps once every five years.
The owner-stay condition in rental programmes comes in a variety of offerings.
Owners usually benefit a free-stay duration of 30 to 45 days throughout the year, but some projects may offer up to 60 days.
The amount of owner-stay days is usually split equally between the high and the low season, where the former is counted as one day and the latter is counted as high as six days.
Some condominium rental programmes only allow owner-stay days during a specific period of the year, while the remaining days are considered as the blackout period. During the blackout period, owner-stay days are charged similarly to when a condominium unit owner has used up their free-stay quota.
The increased competition among income-producing properties benefits buyers with market standards that come with a variety of choices. The island's real estate scene will continue to evolve and potentially pass on condo development potential to other nearby regions such as Phangnga and Krabi, where the development of new airports is likely to generate new demand north of Phuket and in Phangnga province.
Aaron Aerni Kuvanun is a senior analyst with Research and Consulting, CBRE Thailand. He can be reached at firstname.lastname@example.org