Many people, who have visited Phuket, often choose to return to the island. This is not just because of the beautiful landscapes and pristine beaches but also because foreign investors see it as an opportunity to protect their money from inflation by investing in overseas real estate. Purchasing apartments in Thailand can provide a highly profitable and easily liquid asset that can generate a stable income. Let's explore the investment potential of real estate in Thailand this year.
CONTENTS:
- Trends in the property market of Phuket
- Appeals to investors: the charm of Phuket
- The potential for profit in investing in Phuket real estate
- Important considerations when planning investments
- Notable results from the analysis of the real estate market in Phuket
Trends in the property market of Phuket
The Phuket real estate market has been experiencing a recent surge in popularity, thanks to a strong demand from both local and foreign investors. Notably, citizens China are leading the way among non-residents.
Appeals to investors: the charm of Phuket
Phuket Island is strategically located and easily accessible. Phuket International Airport, which is the main entry point to the country, welcomes the highest number of visitors. With the upcoming reconstruction, the airport will have the capacity to receive up to 18 million people annually.
The potential for profit in investing in Phuket real estate
Various factors make buying property in Phuket a favorable choice:
- Stable demand for rental housing: There is a consistent demand for rental housing, with no significant decrease during the holiday season. Unlike in Europe, there is no distinct winter season in Phuket. Occupancy rates reach 100% during the high season from September to October, and demand remains steady throughout the rest of the year. The average rental income in Phuket ranges from 5–7% per year, and in highly profitable locations, it can even reach 12% annually.
- Affordable housing prices: Compared to other major cities in Southeast Asia, housing prices remain affordable. Small studios can be purchased for as low as $50,000, while villas start at $150,000. These starting prices indicate the availability of investment opportunities. Premium properties can cost $1 million or more.
- Solid annual growth in real estate prices: Over the past 10 years, real estate prices have experienced an annual rise ranging from 1 to 10%, according to the Bank of Thailand (BoT). On average, the Phuket housing market grows at a rate of 3–5% per year.
- Accelerated growth in the last 3 years: Since the pandemic in 2020, prices for new buildings in Phuket resorts have gone up by 1.5–2 times. It is expected that prices for villas in Thailand will increase by at least 15% in 2023.
- Low property taxes: Unlike in Europe, there are no annual property taxes in Phuket. Instead, buyers only need to pay registration fees when purchasing a home, which range from 1-3.3% depending on the form of ownership.
- Stability of the national currency: The Thai baht has remained stable against the US dollar for the past 20 years. This stability is attributed to the country's popularity among tourists and its developed economy.
Important considerations when planning investments
Investing in housing units on the west coast is the most promising option. The proximity to the sea and the well-developed infrastructure attract vacationers. On the other hand, the eastern part is not suitable for swimming, so most tourists are drawn to areas with beaches.
When deciding between primary and secondary residences, it is preferable to choose apartments in development projects in Thailand. If there is no urgent need to relocate, it is more lucrative to buy real estate in early stages of construction, as the property's value can go up by several tens of percent. Additionally, secondary housing may not be as high in quality as primary housing. Older houses are less likely to have internal infrastructure, while modern development projects in Thailand offer a wide range of services, from swimming pools to park zones for recreation.
When comparing apartments and villas, apartments have higher investment potential due to their lower cost compared to detached houses. Villas also require more significant expenses for maintenance. Both types of real estate are equally popular among tenants house-hunting for property in Thailand, but the level of comfort and proximity to the coast play a crucial role in their desirability.
It is important to note that Thailand has restrictions on real estate ownership for foreigners. Foreigners can own property through either full ownership (freehold) or long-term lease (leasehold). However, there is a quota for full ownership, limiting foreigners to own no more than 49% of the total area of a condominium. Leasehold properties, which can have lease terms of up to 90 years, are more in demand and typically priced 5–10% lower.
Notable results from the analysis of the real estate market in Phuket
When making economic forecasts, it is impossible to provide a 100% guarantee. However, one thing is certain: the Phuket real estate market has not yet recovered to the level it was before the pandemic began. As the tourist flow increases, the demand for housing will also rise. The stable local economy leaves no doubt that real estate will continue to be in demand. Therefore, investing in housing in Phuket is economically justified and has the potential for profitability.