A Softer Phuket Real Estate Market in 2025!

As we approach the mid-point of 2025, it appears that there is no slowing down for the Phuket property sector. Certainly, when viewed by the number of new projects springing up, the market appears to be charging forward.

But is this manic construction activity a true reflection of the levels of sales taking place? The island still seems to be attracting some new buyers, but even with the wide range of choices available, the market has lost much of the momentum we witnessed over the last few years.   

It is customary, even obligatory, for agencies and property advisors to remain positive about the Phuket real estate market. But the cyclical nature of demand and supply, which swings between underdevelopment/lower prices and overdevelopment/higher prices, may be extremely close to a tipping point.

Perhaps we are at (or on the verge of) a period of excessive irrational exuberance whereby the number of new projects being launched cannot be justified by current demand. Many people are now asking this question. Not only is all the development creating a ‘new Phuket’ – almost unrecognisable from the Phuket of two decades ago – but all the current development activity is pointing to a supply and demand dynamic which just doesn’t add up anymore. 

A slower than normal market in the first half of 2025

At the time of writing, the real estate sector has arguably experienced the most prolific development period since it first truly took off more than two decades ago. This has created a sense of euphoria in some circles, but it has not necessarily equated to more sales on the island. 

Nearly everyone paying attention to the market over the last 18 months has noticed the dramatic price rises occurring all over Phuket, although these are far more pronounced in high-demand areas. But higher prices are not the only thing slowing things down a little, as a number of other factors are noticeably dampening the previous market excitement. 

What else has changed in the global economic environment?

Over-development, much higher prices, and even more traffic jams are clearly dampening real estate demand in Phuket. But global economic uncertainty has also been exacerbated by President Trump’s new tariffs. The proposed new tax changes for foreigners residing in Thailand haven’t helped either.

There is always the currency conundrum to consider as well. A strong Thai baht makes it more expensive for foreigners (when converting their home currency) to purchase a Phuket property. Some currencies have been impacted much worse than others, such as the Australian Dollar and the Russian Rouble. Both of these nationalities have historically been significant buyers on the island. 

Although the complex nature of currency markets makes them incredibly hard to predict, exchange rates have always played a major role in the changing nationalities dominating Phuket property purchases. Interest rate differentials are one key component, but there are also other variables at play. Russia, for example, has had to contend with international sanctions, although despite this their economy doesn’t seem to be suffering at present.

In addition to the above factors, Thai authorities have made it clear that they will no longer accept the use of nominees for Thai companies controlled by foreigners, and many law firms in Phuket have entirely halted the practice of setting up Thai companies to assist foreigners wanting to buy landed property.

The question mark also remains as to whether a 30+30+30 leasehold is legally enforceable, should the land owner refuse a renewal. Hotel licenses are also under scrutiny, and condominiums without a hotel license may at some stage in the future be forced to stop accepting short-term rentals by owners generating income from their Phuket condos. 

How did we get here?

With the multitude of new projects being launched, another question that needs to be asked is this: how did we get here? In our opinion, this was driven predominantly by the above-mentioned euphoria, largely fuelled by the large number of foreigners who, in the post-Covid era, decided to make Phuket their new home in the sun. This was especially noticeable in 2022, which was a record year for Phuket real estate.

The coiled spring that slowly tightened over the Covid period was fully unleashed as soon as Phuket opened up in earnest, and this perhaps clouded the vision of many hyper-confident developers. Seeing huge potential for profit by extrapolating this one-time mass buying event into the future, they jumped on the bandwagon. But as many discerning investors knew, this was never going to be a sure-fire route to quick and easy profit.

The huge influx of foreigners moving to Phuket just after Covid, created a temporary boom. Many developers (of both villas and condos), viewed this mini-boom as a permanent fixture of the market, rather than a temporary one, and sought to capitalise on what they believed would be new permanent trend in foreign residential arrivals.

The sheer number of these ambitious new projects is testament to this mindset, but there was always a chance that the colossal scale of all this new development would never be able to keep up with or exceed future demand. This is especially the case on projects which are priced much higher than the average across the island, at the very least when compared with similar properties in a given local area.

Could we ever see a Phuket property market crash?

The answer to this is: highly improbable. Due to Phuket's cash only market, it has never (and is unlikely to) experience a severe market crash like those experienced in other highly leveraged markets around the world. Mortgages on Phuket properties are very difficult (nearly impossible) for foreigners to obtain, and this lack of speculative lending has created a very stable real estate sector over the last few decades.

Instead of market crashes, Phuket tends to go through periods of stagnation, where the market stays in the doldrums for a while, moving sideways or slightly downwards as sellers and developers lower prices to stay competitive. It is during these periods of stagnation where the demand supply dynamic realigns itself, and where new projects are halted until demand once again meets and eventually surpasses the current supply glut.

A durable and stable market is in equilibrium, whereby there is neither an excess surplus of property, nor a shortage. Phuket generally does not have any extended periods where this equilibrium is disturbed, and has thus has always avoided a boom-bust scenario in property prices.

Will buyers get a lower price if they hold on?

Probably not. During these periods of overdevelopment, prices tend to remain static. Just as the post-Covid era taught us, some individual owners trying to sell their properties quickly may be forced to lower their asking price rather than let the property sit on the market for years. However, this is not a market-wide phenomenon, and is more a case of a rare opportunity for someone to pick up that odd isolated bargain, rather than the norm. 

Any bystander would think that the current lull in the market would precipitate some reduced prices. This may be the case for owners trying to sell older properties, but astonishingly, new projects seem to be forever raising their listed prices.

The reality is that Phuket needs to assure foreign investors in the province that this long-term durability and stability which the market has enjoyed for decades will continue into the future.

Undoubtably, we need fewer new projects, fewer cars on the road (or some serious reflection on infrastructure), and a clearer definition of the new tax laws the authorities would like to implement. In addition, it would be great to see some major changes in legal foreign ownership of both Thai freeholds and leaseholds. A weaker Thai baht would also assist which may be forthcoming with the Thai Central Bank lowering interest rates.

by Thai Residential Phuket Property Guide

This article is from the Thai Residential Phuket Property Guide. To download the 2024/2025 Guide visit ThaiResidential.com