
The real estate market in Phuket started 2024 on a promising note. In the first quarter alone, the island welcomed over 3.6 million visitors, a 30% increase compared to the previous year. Local authorities project that tourism revenue this year will exceed USD 12 billion, a remarkable figure for such a small island. A significant portion of this income is expected to benefit hotel owners and investors in properties in Thailand renting accommodations to tourists. Let’s explore the types of real estate that generate revenue in Phuket and key factors to consider when choosing an investment.
Content:
- Which areas to consider when purchasing investment real estate
- How to choose a housing unit for investment
- New builds or second-hand units: Which is better?
- Apartments or villas?
- Key investment options
- Real estate appreciation
- Rental income
- Real estate management
- Guaranteed rental income
- Self-management vs. professional management
- Advantages of professional management
- Phuket's investment outlook
Which areas to consider when purchasing investment real estate
Phuket is one of the most popular resorts, drawing millions of tourists annually. In 2023, the island hosted 11 million visitors, generating USD 11.5 billion in tourism revenue. Projections for 2024 suggest an even more significant milestone, with approximately USD 12 billion anticipated from the hospitality sector. These numbers are likely to rise in 2025, barring major global disruptions.
The bulk of profits typically flows to hotel and serviced apartment owners. When considering real estate investments in Phuket, the focus often shifts to participation in the hospitality sector. The island's map reveals that the most prestigious and profitable hotels are on the western coast (Kamala, Bang Tao and Nai Thon) due to the superior beaches, as the eastern shore is largely unsuitable for swimming. The western coastline also sees active infrastructure development and the construction of high-end development projects in Thailand, attracting more affluent tourists.
The western coast is known for its beaches and well-developed infrastructure. With restaurants, shopping malls and entertainment centres, this area is beautiful for tourists and a profitable option for investors.
How to choose a housing unit for investment
Investing in beachfront real estate yields the highest returns. These assets are in constant demand and can deliver maximum income. This type of real estate, scarce and highly valued in Phuket, remains a top choice for investors.
The island offers diverse investment options, from studios to luxurious villas. It's important to stay informed about market trends and select the most promising assets.
New builds or second-hand units: Which is better?
Purchasing newly built or properties for sale off the plan in Thailand offers distinct advantages over buying on the secondary market:
- At the initial sales stage, prices are often significantly lower, enhancing the overall profitability of the investment.
- The most lucrative properties are often found among new developments, mainly serviced apartments managed by hotel operators in prime resort areas.
International hotel chains have only recently entered the Phuket market. Investors opting for guaranteed income programs during the first five years rarely sell their assets early, as it is often not financially advantageous. Even if someone decides to sell such a property, the new owner may be disadvantaged. For example, an initial investor might buy an apartment for USD 100,000 during construction and receive a guaranteed 7% annual return for five years. After two years, the unit might sell for USD 115,000, but the new owner will still receive the 7% return based on the original USD 100,000 purchase price, not their higher investment.
Selling such real estate after five to seven years is generally more profitable when the best development locations are fully occupied and housing prices naturally increase. For those interested in selling sooner, avoiding guaranteed income programs is better. With top-tier projects still available, it's an opportune time to invest in new developments.
Apartments or villas?
The choice depends not only on your budget but also on market trends:
- Demand for rental villas in Thailand is considerably lower than for apartments. Standalone houses are often located farther from the sea, where land costs are lower and access usually requires a car. However, many tourists are reluctant to drive in a foreign country with left-hand traffic.
- Most villas are not managed by professional resort networks but rented out by individual owners or small companies, which affects the quality of services and, consequently, rental income.
That said, exceptions exist. Villas near the sea can be found with hotel licenses, professional management, and even guaranteed income. However, these properties typically start at USD 2 – 3 million or more, making apartments a more affordable and profitable investment choice.
Key investment options
Investing in real estate offers multiple revenue streams:
Real estate appreciation
One of the main ways to profit is through capital growth. Over time, land and property prices in Phuket increase by an average of 5 to 10% annually. However, the market is becoming saturated with new condominiums and hotels, creating competition. Capitalisation is generally calculated over a period of 10 to 15 years. Factors like rising tourist inflow, limited land availability for development and continuous infrastructure growth will likely boost future property values.
Rental income
Rental income is another primary source of earnings for investors, split into short-term and long-term rentals. Short-term rentals are only permitted for properties with hotel licenses, which can be rented out for brief stays and often generate higher returns. Apartments and other properties without hotel licenses can be rented for 30 days or more, providing stable profit and attracting long-term tenants.
Real estate management
The management itself can be a lucrative business. Some agencies specialise in these services, offering various cooperation terms.
Guaranteed rental income
Investors frequently inquire about the return on their investments. In Phuket, guaranteed rental income schemes are typical, with offers such as 7% returns over 15 years. The developer guarantees an annual return of 7% of the property’s purchase price. In some cases, income can be generated even before construction is completed and the complex is operational. The management team handles all rental tasks.
In addition to guaranteed income, investors often enjoy perks such as up to four weeks of annual free stays at their property (depending on the developer's terms), which allows them to enjoy Phuket's amenities, including fitness centres, pools, restaurants and spas, often with added discounts.
Developers may also offer buyback options, repurchasing properties at the original price plus a 10 to 15% premium after several years, making apartments in Thailand even more appealing for investors.
Self-management vs. professional management
Over the past eight years, Phuket’s real estate market has undergone significant changes. Competition between small local management companies and global hotel chains has intensified. International brands collaborate with local developers, ensuring projects are built to hotel standards, after which the hotels manage the properties.
Previously, small management companies and individual owners dominated the market, each finding tenants independently. However, the entry of major international brands has disadvantaged smaller players. Large hotel operators have vast resources, ensuring high occupancy rates even during the low season, which is crucial for investors.
Advantages of professional management
While hotel operators take a portion of the profits, they eliminate all associated risks, providing passive and often guaranteed income for property owners. Investing in beachfront complexes with professional hotel management is one of the most secure and potentially lucrative options. While self-managing rental properties might theoretically yield higher profits, it involves significant expenses and risks. For example, during the pandemic, most privately rented apartments remained vacant, leaving their owners without profit. Meanwhile, properties managed by hotel operators continued to generate guaranteed returns.
Phuket's investment outlook
Despite market saturation, real estate investments in Phuket remain promising due to increasing tourist numbers, limited land availability and ongoing infrastructure development. These factors are expected to drive significant growth in housing values and income potential, making the island an attractive destination for investors.