Residential demand returns to Phuket
Sandbox brings a return of prospective foreign buyers, but more Thais and expats are seeking getaways as well
Four months after kicking off, the Phuket Sandbox programme has brought some life back to the island that has had to depend solely on the domestic tourism market for almost two years.
According to the Tourism Authority of Thailand (TAT), a total of 59,689 international tourists visited under the Sandbox scheme from July 1 to Oct 31. While this may not be a large number, it was the beginning of preparations for the country's broader reopening and the upcoming high season. An increase in activity was also seen in the residential market as traffic has returned.
"The overall Phuket residential market saw a positive movement after the reopening under the Phuket Sandbox scheme," said Prakaipeth Meechoosarn, head of Phuket property sales with CBRE Thailand. "During the lockdown period, most of our inquiries have been from local buyers who are looking for vacation or second-home properties. After the sandbox model was opened, the inquiries expanded to foreign residents, expatriates and some international tourists.
"This has led us to believe the scheme has helped bring back returning clients who have had their eyes on properties for the past years but they could not travel due to border restrictions. However, investors have yet to fully return due to uncertainties over the global economic outlook and the rental market."
The Phuket residential market used to be perceived as a market for foreign buyers but that was in the past. The availability of residential property has now expanded to serve a broader range of expatriate and local resident demand in recent years. We have seen a wider range of products being offered in the market as a result of this wider target market.
As a result of the Covid pandemic, in 2020 the market was reset to become more of a buyers' market with more negotiable options and opportunities in some locations. Some developers have been waiting to clear their unsold supply in the island.
In 2021 generally, buying opportunities will remain until the supply-demand balance stabilises. The ultra-luxury market has been active in terms of both resales and sales of remaining units from developers. There have been limited new launches in this segment given the scarcity of prime beachfront land with sea views.
At this time, we are seeing a trend of buyers preferring ready-to-move-in properties as these make them feel more secure, especially as they are able to view the actual product right away. People are also seeking to use the properties as their safe haven during the pandemic.
The hybrid work model has made it easier to shift between city life and beach life, creating demand from those seeking vacation homes. Units with sea views, beachfronts and those with modern styles are the most attractive from the buyers' perspective.
Despite increasing demand, residential supply in Phuket is low and limited as a very small number of new projects were launched in the past two years amid disruptions caused by Covid. According to CBRE Research, the total number of newly launched units -- both villas and condominiums -- decreased by 98% year-on-year in 2020 and another 34% year-on-year first half of 2021.
At the same time, there is still high demand for some premium projects in prime Phuket locations, which has resulted in some developers deciding not to offer generous discounts. This is one reason why ultra-luxury prices, which had fallen in the early stage of the pandemic, have recovered fast.
Going forward, CBRE expects to see more international arrivals to Phuket as travel restrictions are eased, attracting more tourists and investors to consider acquiring vacation homes on the island.
Pawika Thienwongpetch is an analyst at Research and Consulting, CBRE Thailand. She can be reached at firstname.lastname@example.org