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Phuket Property Guide: Will there really be a ‘Covid Crash’ in Phuket property?


This article addresses the coronavirus (COVID-19) pandemic, and whether or not there will be a noticeable impact on the Phuket real estate sector.

We have heard the opinion expressed that this economic slowdown will result in a spectacular drop in the price of Phuket properties for sale, but we are not convinced by this argument. It is far more common for a property “crash” to stem from liquidity problems in the financial system, which put pressure on lending, especially mortgages.

This kind of liquidity crisis hits home for most people when they are unable to afford their mortgage payments. Where property ownership is financed, there is clearly a risk of a systemic problem impacting the property market. However, it is far less likely in Phuket where the market is dominated by foreigners buying properties in cash.

We don’t dispute the fact that some freehold condos will be put up for sale by foreign owners in urgent need of cash. Our disagreement is with the idea that selling will become its own kind of pandemic, causing property prices in Phuket to plummet.

Such a scenario naturally relates to the resale market, but that is a relatively small sliver of the Phuket market. New builds represent by far the most properties bought in Phuket each year. These are generally condos bought off-plan, or in the first phases of construction. Any bargains in Phuket are most likely to be found in the new build sector.

We are not aware of any developers advertising Phuket condominium units at a discount at this time. In Bangkok there is at least one project promoting discounts between 100,000 and 300,000 Baht on condo starting at 5.1 million Baht. One prominent international property specialist has stated they don’t expect Phuket condo prices to fall by more than 5%. Using the Bangkok developer as an example, assuming the 5.1 million Baht condo is receiving the 100,000 Baht discount, that is still only 1.96% discount.

This is well in line with the forecast for Phuket, and what we expect to see here; however, it may take the form of indirect incentives. To enhance the value for buyers, there could be a complimentary furniture package, or an upgrade to higher-end furniture and appliances. Another possibility is including the foreign freehold upgrade in the purchase price, something which is normally an additional fixed amount or a percentage added to the list price.

A fortunate buyer may also find a bargain when an owner is forced to sell during construction. In Phuket it is not uncommon for people to “buy the dream,” even to the point of overextending their finances. Even though condos are still cash sales, they are paid in tranches at various phases of completion. A job loss today could mean they are unable to fulfill their next payment(s), thus sacrificing the property.

These units could offer bargain hunters exactly the kind of discounts they are looking for. That said, if they find one, it is most likely to be on an already cheap property for sale in Phuket (e.g. a lower-end condominium), and in which the buyer had tied up a considerable portion of their savings. But even if they can get the condo at half price, when it was only $100,000 to start with, that is not really a deal to write home about.

Similar to foreign buyers, few developers in Phuket finance their projects with big bank loans. New condos are sold off plan, with extensive marketing, and construction only tends to begin when enough units sales have been made to fund the building. This cash only dynamic for funding a condo project means no developer will be struggling if they have sold out their 49% foreign freehold allocation. We are even aware of developers in Phuket who have been allowed to bring their projects to completion, as long as all of their workers are tested for coronavirus.

Any developers who are unable to sell sufficient units to begin construction, and who lack independent capitalisation, will simply suspend construction and sit idle. This is obviously not optimal because their income stream will be dry, but since no bank is pressuring them to repay a loan, they are not likely to be forced to raise liquidity through a “fire sale” of their remaining units.

It is possible that deposits or partial payments have already been received, even though the development is now on hold. Because sales contracts virtually always contain a “force majeure” clause, to indemnify the developer against “Aacts of God,” they will not be compelled to return any money to buyers. A global pandemic is, after all, an act of God preventing completion of the project.

Force majeure clauses can also be found in guaranteed return contracts, which is unfortunate for any owner of an investment property in Phuket. Most management companies have already acted to suspend guaranteed return payments.

This does not mean that developers will face no financial consequences from the COVID-19 pandemic. They are obviously far better off if they can build, sell and build some more. However, the notion that they will be forced into offering big discounts is not necessarily true.


by Thai Residential Phuket Property Guide

This article is from the 2018/2019 Thai Residential Phuket Property Guide. To download the 2019/2020 Guide visit

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