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Avoiding the Gold Rush Greed, Bankman-Fried & Co Phuket Trap

Recently my young daughter has developed a habit of mimicking an Alicia Keys song ‘Girl on Fire’ but actually replaces ‘Girl’ with amusing substitutions to suit circumstances. Whilst boarding a plane, my little girl actually sings (much to our concern regarding our potential removal from the plane) and quite loudly, with laughter “This plane is on fire-eeeeeeeh.”

  Boat Lagoon

November 2023

Fires Don’t Burn Forever

Recently my young daughter has developed a habit of mimicking an Alicia Keys song ‘Girl on Fire’ but actually replaces ‘Girl’ with amusing substitutions to suit circumstances. Whilst boarding a plane, my little girl actually sings (much to our concern regarding our potential removal from the plane) and quite loudly, with laughter “This plane is on fire-eeeeeeeh.”

It is with that tune playing in the background of my mind that I write about Phuket’s real estate and supporting economy, a place dear to my heart, a market that is critical to business and survival but nevertheless is better stable and solid than boom and bust.

“This Phuket is on fire-eeeeeeeeh”. Yes, the real estate market does indeed appear to be on fire, for now. Inevitably, some are destined to be burnt.

This ‘gold rush’ feel to Phuket inspires deep within me a healthy sense of cynicism, caution and foreboding about what might or is likely to happen next.

Spiralling Rents / Migrant Influx

Russian nationals have understandably increased in number of visits and relocations to Phuket, naturally accepting the benefits the Thai authorities have offered in relation to visas and working arrangements. New families and residents naturally put pressure on poorly prepared infrastructure, such as roads, whilst monies inevitably find their way into the local and national economy. Landlords have seized the moment and increased rents greatly, resulting in a squeeze on existing tenant budgets, movements and downgrades for some existing tenants and departures for others who were operating on the thin line of economic sustainability. Russian nationals have suffered from this greed and have had to pay excessively high premiums for lodgings previously offered at far lower rates. Culturally, as evidenced extensively in the allegedly controversial works of Douglas Murray (see: The Strange Death of Europe, Bloomsbury), large waves of migrants will disrupt a culture and cause gaps of understanding and practice between existing habitants and new arrivals based on different behavioural norms. If a system is not equipped to allow adjustments to be made, conflict and unhappiness can result but can also dissipate, over time. Murmurings, complaints and rumblings exist in Phuket along the race-driven lines of ‘There are too many Russians’, whose existence actually adds to the continuing vibrant mix of Phuket’s demographic constitution. Phuket has rarely ‘stood still’ in its mix of arrivals and residents and that is overall fortunate in terms of its economic prosperity.

Cowboys, Cowgirls and Leopards with the Same Spots

Developers who have ‘developed in other countries’ but some of whom do not appear to know much about development of property in Thailand, have appeared and in some cases ‘re-appeared’. One case in point involved one our clients’ recently and clearly ‘falling in love’ (cue drone shot of bare land with violin music) with the design and concept of an unbuilt unit. The developer, identifying this emotion, proceeded not to co-operate with disclosures on due diligence, led a merry dance on contract amendments, indicating agreement on some changes and, suspiciously, in an email sent at Friday night cocktail hour announced, “no amendments would be entertained at all even after having been discussed before”’. Agreeing to register a lease during the building phase and then, at the last minute, shamelessly withdrawing that agreement and… threatening to confiscate the buyer’s deposit.

Lovestruck clients dropped all standards and professional perception skills, swiftly signing on the dotted line and mysteriously dismissing paid-for advice. The developer’s actions being the kind of behaviour that Sadia Khan, the British Psychologist living in Dubai (@sadiapsychology), might attribute to childhood trauma issues leading to the inability to be kind or tell the truth in a real estate development and sales context.

Slag Rises to the Top (molten by-product slag that is)

Some ‘businesspeople’ notably absent during the COVID years have re-emerged, with polished stories of their renewed interest in the future of Thailand and their desired role to play in it, provided they get a commission or benefit from those choosing to invest their monies here. Suddenly, stolen deposits, broken contracts, illegal land and illegal construction, hindered access rights and fraudulent documents are forgotten whilst said market participants dry clean their white upscale beach club outfits and play ‘false friend’ games at dinner parties and school children gatherings to inspire short term trust to loosen up the purse strings. Many ecosystems need parasites to clean up the ‘waste’, and certainly there is a class or type of investor intent on wasting their monies for the benefit of the parasites.

Do Prospective Phuket Investors Absorb and Apply the Global News?

Not everybody is a student of the past bubble eras, perhaps generationally ignorant of the South Sea Bubble, the fallout of the California Goldrush or forgetful of the Dot Com Boom (and Bust) eras. Some may have been very young or even unborn at the time of the 1997 Asian Economic Crisis, distracted at the time of the credit default swap driven 2008 Global Economic Crisis or intently watching Depp v Heard when global states were delving deep into their reserves to prop up economies following the COVID crisis.

However, it would take a strong effort in indifference to the news, albeit with great cortisol management outcomes, to be unaware of the FTX and the Sam Bankman-Freid Fraud Fiasco (alliteration bonus, thank you!). SBF is now a convicted fraudster, just like Bernie Madoff – who managed to persuade investors to fund trades to the tune of 50 billion USD (!) which he and his investment fund actually never made at all. Personally, I struggle to borrow small beans money from local banks, but then honesty is apparently not a determining criteria in raising funds. If I were in debt to the tune of 40 billion USD, perhaps it would be easier to get the extra 10 billion.

And yet, even whilst we still keep witnessing the seemingly impossible – duping ‘astute’ CEOs and CFOs, ‘C-Suites’ (always makes me think of old Apple Computers for some reason), Investment Fund Managers and financial regulators, none of this appears to be perceived as relevant in the tropical sunshine and rainy seasons of Phuket. Oh no, different natural laws appear to apply here.


Wolves, Sheep’s Clothing

SBF was often mentioned in terms of his unkempt appearance – his curly overgrown lamb-like locks (since shaven off), his cargo pants and old t-shirt look whilst, at the same time, managing to keep company with the truly successful, rich and famous jetsetters some of whom – but not all – made their money through legitimate means. Appearances, my parents used to tell me when I first entered the dating scene, can be deceptive.

I was also drilled by my professors and teachers not to write essays with questions to the reader, but how can I resist? Aren’t rules meant to be broken? (Ironic use of questions as a precursor to more questions, perhaps?)

In Phuket, the rules of deceptive appearances should not be thrown out of the window. Is everyone driving a Mercedes or luxury car – blissfully unaware that such vehicles have responsive brakes and working indicators – truly successful? Is that see-through white cotton-shirted. champagne-quaffing agent, an honest upright individual well versed in the ethics of conflicts of interest, anti-money laundering and anti-corrupt practice laws? Will they recommend an independent lawyer who will thoroughly check the title and rigorously analyse the contracts because they truly care about my wellbeing?

Was that truly entertaining host at the Masquerade-new-beach-club-fire-flamethrower-dancers party enamoured with my drunken anecdotes and thus emailed me a sales deck for their latest innovative “25% Internal Rate of Return” project that they haven’t “told anybody else except dear friends” about?

Is it ok to buy a ‘nominee structure’ because lots of other people seem to have done so? Who needs to check the history of land and where it comes from if a bank will lend money on it (noting banks spread their risk across their massive portfolios)? If a construction permit says 3 bedrooms 2 storeys and that is what seems to be built, then surely everything else which is built is legal too? Lots of buildings seem to be built on steep gradients, so they must all be legal, right?

Slow and Steady Wins the Race

At each hike I now regularly attend, there is an introduction before the very competent and trustworthy guide delivers simple but effective safety instructions. Each of the participants says something about themselves, and what is said and not said can be very revealing. I happen to regularly be the second-longest serving resident (20 years plus and counting) non Thai in the group, absolutely blasted by the other person who has been on the island as a guest for 44 years. Some ‘oohs and ahs’ and sage nods sometimes result from the announcement of longevity by a non-Thai. However, I quickly quieten down any notions of wisdom being simply accumulated over time.

It is very much possible to be somewhere for 20 years and not pay attention to much, not learn much, ignore patterns of behaviour, facts and law and muddle through with a bit of luck. Our guide also says this: “Everybody has a different walking pace and some people naturally walk more quickly than others, however, this is not a race and we all need to get to the destination together”. Surely you know what happens next… that’s right, some of the less attentive hikers set an unrealistic pace for themselves, tailgate other hikers and then on that difficult climb four hours in, suddenly seem to be stuck at the rear. We are in Phuket together, slow and steady – wins the race.

By Desmond Hughes, Senior Partner of Hughes Krupica
Hughes Krupica is a law firm which specialises in Real Estate; Construction; Hospitality; Corporate; Commercial; Tech; Dispute Resolution; and Litigation, operating from Phuket, servicing clients in relation to their business activities in Thailand and in other regions of Asia.

 Contact info:

Hughes Krupica Consulting

Hughes Krupica Consulting Co. Ltd
23/123-5 Moo 2 Kohkaew Plaza
The Phuket Boat Lagoon
T. Kohkaew Amphoe Muang
Phuket 83000 Thailand
Tel: (0) 76 608 468

Hughes Krupica Consulting (Bangkok) Co. Ltd
29/41 Soi Ladprao 22
Ladprao Road
Chankasem, Chatuchak
Bangkok 10900 Thailand
Tel: (0) 20 771 518

[email protected]

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