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How will the ‘New Normal’ affect the Phuket real estate sector in the years ahead?

  Rawai

Tourism is vitally important to Phuket, and the industry was naturally devastated when COVID-19 forced the closure of Thailand’s borders. At the time of writing, however, we are optimistic about prospects for a reinvigoration of Phuket’s tourism sector. The global rollout of vaccines is underway, which should soon allow more visitors to plan their holidays on the island. Given the strong correlation between tourism and property sales, the return of newly vaccinated tourists will almost certainly provide some wind in the sails of Phuket’s property sector.

Are we expecting an immediate return to “normal” – a rapid reversion to the numbers of condo and home sales seen in the years leading up to the coronavirus crisis? Probably not. It is more likely that we will witness a discernible paradigm shift in the Phuket real estate market, forced upon us by the ‘new normal’. For real estate agencies on the island to stay ahead, they will need to adapt, with new business models and a change of focus.

We have always been quite lucky in Phuket. The real estate market cycles here are far removed from the normal peaks and troughs found in other markets around the world. The dynamics of the Phuket property sector even differ from other cities in Thailand. For example, in Bangkok far more local Thais own condos as a percentage of all sales, than on Phuket’s west coast – the most vibrant area of the island. This means Phuket has always relied heavily on a thriving tourist industry to generate sales.

Despite the grim picture painted above, the Phuket real estate market has by no means ground to a halt. Many buyers are searching for bargains right now – some quite successfully. Other buyers who have been sitting on the sidelines for years have finally decided to jump into the market after finding attractively priced property.

But it is not just villas and condos that are enticing buyers. There are also many Phuket hotels for sale and this sector has picked up considerably over the last few months with a much larger choice of hotels on the market than in the months immediately preceding the coronavirus crisis. A number of private buyers (and even some major corporations) are seeking to capitalize on the current situation. Those who select wisely today will undoubtedly see their investment pay off handsomely in the years ahead.

 

As with any major purchase, the old maxim still applies: caveat emptor – let the buyer beware. If the Thai authorities use this crisis as an opportunity to clamp down on the illegal hotel sector, it could have a significant impact on the future of both the boutique hotel sector and the low-end condominium market.

A recent Aljazeera article echoed the sentiments of other mainstream media outlets in calling for a rethink of global tourism, and an end to what is being called ‘extractive tourism’.

First coined by the academic Vijay Kolinjivadi, extractive tourism is when the financial benefit of mass tourism fails to compensate local communities for its intrinsically destructive nature. In other words, a growth in tourism offers clear benefits to a community, but Kolinjivadi’s argument is that there are also plenty of losers. For example, the best interests of local populations and the environment are frequently disregarded when developing an area for tourism, sacrificing ethics for profits. Thailand, especially Phuket, are sometimes named when this topic is broached.

It has been wondrous to see leatherback turtles laying eggs on Kata Beach for the first time in decades. This was, of course, a consequence of no tourism, and those clever turtles knowing it was safe to visit the beach. But there has also been a human cost to the lockdown, and the people living here must be cared for too. Perhaps we will embark down a more eco-friendly path, with a fairer and happier equilibrium.

Looking back three or four decades, tourism was very different in Thailand. But there was little or no evidence then that backpackers staying at bungalow resorts on far flung islands were hurting the local communities or the environment. Back then, instead of mass extractive tourism, the wealthy holiday makers took up residence for a few weeks or months in luxury villas or hotels in Phuket’s more idyllic locations, while backpackers sought out more adventurous and often isolated locations.

Who knows what the future holds as we gradually return to something resembling normality? Backpacking may live on in Thailand, and there is little doubt the luxury market too will survive and flourish. But cramming tens of thousands of cheap hotel rooms into what was once an area of scenic natural beauty may not be the way forward. After all, the imbalances referred to by academics like Kolinjivadi are already plain to see in some areas of Phuket.

The Phuket real estate market has changed in many ways, and these have been most noticeable over the last 5-10 years, as the number of tourists visiting the island grew exponentially. Many of those visitors instantly fall in love with the Land of Smiles and the Pearl of the Andaman Sea, and in the course of their 2-week vacation decided to buy the dream and invest here. Since February 2020, however, this segment of the market has pretty much disappeared, and the closure of many shopping malls has meant the shuttering of the property kiosks and real estate sales booths once frequented by would-be buyers.

It is not unreasonable to suggest that we may yet see a ‘devolution’ of the Phuket property market. Quite possibly the market could revert back to how it was many years ago. There may be fewer projects and fewer buyers, with higher price points per sale, but it is difficult to predict exactly what the future holds.

The last 25 years has presented Phuket with multiple financial crashes, epidemics and natural disasters. Phuket has an excellent track record for responding to and overcoming all of these crises, but the duration of the border closings and the depths of the economic crisis this time have been unprecedented. This means that the Phuket real estate market may add new dimensions in the years ahead, and reopening may require greater nuance than simply returning to business as usual.


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

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Thai Residential
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T.Rawai, Phuket 83130
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