When our calendars are down to one final page, we all start getting excited for the holiday season. While the Philippines begins celebrating Christmas on September 1st (yes, they really do!), and the holiday season in the United States begins with Thanksgiving in late November, in the rest of the world the first Sunday in Advent kicks off the Christmas season.
In the song referenced above, the singer dreams of taking a break from the holidays and “spending this one alone”. That desire for an end-of-the-year break is universal, but instead of sitting on their own, most people are looking forward to a vacation.
Let’s face it, when it is pitch black by 4 PM, and everywhere you go you’re met with biting wind, snow, or cold, driving rain, a little sun and sand is very welcoming.
While it is technically also winter in Thailand at this time of year, the two concepts are radically different: instead of grey skies, think blue; instead of stormy seas, think water as calm as a swimming pool; and replace the cold wind with warm sea breezes.
The weather is one of the major reasons why millions of foreign tourists visit Phuket every year and why an increasing number of them are deciding to stay.
Phuket is not only one of Asia’s most sought-after vacation spots, it is also one of the most dynamic real estate markets in the region. Like any property market, Phuket has had its challenges, but these have mostly been outliers, and the island has demonstrated remarkable resilience to move on from each one.
The term “Black Swan” was used by Nicholas Taleb to describe random events that are difficult to predict, but which people nevertheless insist (with the benefit of hindsight) could have been foreseen. Phuket has encountered its fair share of Black Swans, to name just a few: 9-11, bird flu, SARS, the Tsunami, widespread flooding, and the Covid-19 pandemic. There were also financial market upheavals starting with the Asia Crisis in 1997, followed by the dot-com bubble in 2001, and the 2008 global financial crisis.
All of these had an understandable knock-on effect on the real estate market in Phuket, but the impact each time was muted, if not negligible. One major reason for Phuket withstanding these challenges is that the property market is dominated by foreign buyers, who receive very little lending from local banks. At the same time, few international banks are interested in funding overseas mortgages. This makes the bulk of the market for condominiums and villas on the island a cash-only business.
The reason this makes Phuket such a stable market for buying a home or an investment property is that without mortgage payments, there can be no leverage, and without leverage, there are no scenarios whereby a homeowners can “get stung” by rising interest rates. Phuket has therefore avoided the booms and busts that have befallen other markets when interest rate fluctuations have led to mass foreclosures.
Foreign buyers have certainly been attracted by such a stable real estate investment. Prior to the Pandemic, most property development on the island focused on condominiums. This made perfect sense because foreign buyers have an outsized impact on the Phuket real estate market, and foreigners are allowed to own freehold condominiums in Thailand.
Any condominium development in Phuket must reserve a minimum of 51% of the unit area for ownership by Thai nationals, meaning foreign ownership of any given project is limited to the remaining 49%. But that ownership is outright - freehold, in the name of the buyer - and the only limit on the number of condos an individual can own across Thailand is their personal financial resources.
That is why, pre-Covid, foreigners were not just buying condos for residential purposes, rather, their targets included the modestly priced Phuket condos, which made ideal rental properties for the growing influx of tourists.
Of course, the real estate market in Phuket had already expanded well beyond buyers of investment properties. Phuket has long been a popular destination for retirees looking to stretch their retirement income a little further while enjoying the glorious tropical weather.
Young families with children have also been settling on the island for years, and one need look no further than the expansion of international schools to know that this trend is expected to continue.
The island has also welcomed scores of “digital nomads” who can just as easily log in for work from a poolside deckchair as from an office. On top of that, Phuket is popular with professionals who report to an office in the Asia-Pacific region throughout the week but fly back to Phuket from Friday to Monday morning.
The trend toward more families and permanent foreign residents in Phuket has seen a sharp increase in the demand for villas as residential accommodation, and a noticeable upswing started during the Covid-19 lockdown. Phuket was probably a less oppressive place to be than Bangkok, and certain less than most other countries. Because even if bars and restaurants were closed, when you were outside, you were still on a tropical island, after all.
Some foreigners suffering lockdown abroad bought Phuket villas via video tours or Zoom calls. When flights were once again available, even the required 2-week stay in a quarantine hotel did not deter yet more people from flying to Phuket. As soon as they were released from quarantine, they wanted villas to live in.
There were those who saw the writing on the wall in the spring of 2019 and made their way to Phuket before flights were grounded and lockdowns began. They signed long-term rental contracts on villas and rode out the pandemic in Phuket. Many of them then chose to buy villas (or condos) and relocate permanently to Phuket.
While investing in a Phuket villa is a very attractive proposition, the process of buying one as a foreigner is not straightforward. Though there are specialised government investment programs that may give ultra-high-net-worth individuals the right to buy land, foreigners generally cannot own Thai land directly in their own name. Due to this restriction, foreigners who want to buy a villa or house, must either lease the land (the maximum term period is 30 years), use a Thai corporate structure to acquire the land, or buy it in the name of a Thai spouse. Because most buyers desire greater permanence than 30 years, and most do not have a Thai spouse, the most common route to ownership is utilising a Thai limited company to facilitate the purchase.
While it is perfectly acceptable to use a Thai company to purchase a property, this is where many foreigners are advised to cut corners, and structuring everything correctly is essential.
For starters, the Thai limited company must have a minimum Thai shareholding of 51%. The Thai shareholders must have a vested interest in the company, and they may not be nominees. Nominee shareholders are usually just names on a piece of paper, and the individuals have no contact with the foreign buyer and no interest in their company.
Next, the company itself must be a legitimate business, which includes paying taxes and filing audited accounts. Furthermore, the sole purpose of forming the company cannot simply be to buy a villa (through holding its land) in which one of the foreign shareholders can live.
Government authorities can see through bogus ownership structures, and even if active enforcement is not always visible, it would be unwise to think that the authorities in either Bangkok or Phuket are simply turning a blind eye to blatant flouting of the rules.
As mentioned already, buying a villa through a Thai company is not straightforward, but any reputable estate agent can walk the buyer through the process and help by recommending a good local law firm. The process may be too daunting for some, making the freehold condominiums a more attractive option. But for anyone with the patience to persevere, a villa they can come home to each night, and the lifestyle it provides, will be a worthwhile reward.
The increased demand for properties of all kinds - condos and villas - has seen development expand to areas that were once quite literally undeveloped. Being an island, Phuket naturally has a finite amount of land on which to build, and it stands to reason that the Andaman coastline and the southern tip of the island - offering sunsets and beaches - were originally the most popular places to build.
Even if parcels of land are still available in the West and South, the cost is driving developers to look further inland. It is therefore in the Central Valley - once home to little more than coconuts, water buffalo, and rubber trees - where entire communities of villas are being built.
But living more centrally does not mean living in isolation. The central areas of the island are home to some of Phuket’s largest shopping centres and supermarkets, and there are plentiful restaurants for both Thai and western food. And while Phuket may be Thailand’s largest island, at only 21 km (ca. 13 miles) from east to west, any Phuket property development is still only a relatively short drive to sand, sea, and sunsets.