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Phuket Property Guide: Driving downward pressures

Phuket Property Guide: Driving downward pressures

While the outlook for Phuket property is generally positive, as we detailed last week, every market carries potential risks and pitfalls. This week we look at the factors that negatively affect Phuket’s property market.

By Thai Residential

Sunday 9 June 2019, 11:00AM

Overdevelopment is one key concern, but at this stage it appears that supply is matching demand. Photo: Tanyaluk Sakoot

Overdevelopment is one key concern, but at this stage it appears that supply is matching demand. Photo: Tanyaluk Sakoot

The following examines a few things which could negatively impact the Phuket real estate sector.

What If Global Interest Rates Rise?

Foreign buyers of Thai property typically do not receive financing, so there is no risk of demand being affected by mortgages becoming unaffordable.

If, however, global interest rates reach a level which encourages savings over investment, it could negatively impact foreign purchases of Thai property.

Fear not – we’re not anywhere near that point today.

US-China Trade War

The knock-on effects of the trade war between the US and China are already being felt throughout the world.

China finances a lot of infrastructure projects in Thailand, and if that money is reallocated, it could impact Phuket’s property market.

Global Economy

Thailand is highly unlikely to be the source of any major financial crisis, but even a healthy market can be affected by “contagion” during a global meltdown.

Another financial crisis would see a drop off in global spending, meaning fewer people traveling to Thailand, and fewer Phuket properties being bought.

Foreign Exchange Controls in China

The Chinese government has begun implementing tighter control over capital outflows, including record fines to companies and individuals caught transferring money in defiance of these regulations.

Some of this money has been flowing into overseas real estate, including Phuket. Any further tightening could have negative repercussions for the Phuket property sector.

Declining Tourism

Laguna Golf Phuket

We already know that tourism is a key driver of the property market in Phuket.

Falling tourist numbers would mean fewer buyers for many of the developments on the island, which would affect prices.

Over Supply

In every real estate market in the world prices begin to stagnate and even fall when supply outweighs demand.

New builds in Phuket are currently meeting demand, with no major lag or excess. The resale market potentially has an “overhang”, however, as a result of the number of new developments built in the last few years.

Any buyers with a long-term outlook should expect to be rewarded.

Negative Publicity

Bad publicity is detrimental to any industry, and the real estate sector in Thailand has not been immune to this. Some of the bad press has been warranted, but by no means all of it.

Unfortunately, reporters do not always take the time to uncover the truth behind the tale being spun by an aggrieved foreigner. The foreigner may have been legitimately hard done by, but the truth of it could also be they just made avoidable mistakes.

Sometimes a journalist with a sympathetic ear does not fully comprehend the true nature of the story they are covering, and the story only paints Phuket in a bad light.

A Change in Visa Rules

Thailand has been accommodating to foreigners for decades, although there have been periods of tightening (then relaxing) of immigration requirements over the years.

Extended stay visitors or anyone using a proper visa issued by a Royal Thai Embassy will likely be just fine. Likewise, we are confident that anyone over the age of 50 who is retiring in Thailand will always be welcome.

But people relying on sham student visas or 30-day visa runs will probably see the avenues restricted even further.

This article is from the 2018/2019 ThaiResidential Phuket Property Guide. To download the 2019/2020 Guide visit: thairesidential.com/phuket-property-guide or call +66 9484 11918.

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