In years past, as the urban sprawl of Bangkok unfolded, I’d be struck by the sheer volume of new development, a testament to Thailand’s seemingly endless appetite for construction. But this year, something was different. The usual awe was muted, replaced by a weary sense of déjà vu. Phuket, it seems, has finally numbed me to the relentless march of the concrete mixer.
The reason for this newfound indifference lies not in Bangkok’s diminished dynamism, but in Phuket’s dramatically altered landscape. Over the past year, the island’s property market, once a beacon for overseas investors and those seeking a slice of tropical paradise, has been inundated with a tidal wave of new developments, predominantly condominiums. This deluge of fresh inventory is beginning to choke the resale market, creating an environment eerily similar to the one that has plagued Bangkok for years, where a glut of new builds has rendered older properties virtually unsellable.
The sheer quantity of condominiums that have sprung up across Phuket is staggering. From the once-sleepy northern beaches to the bustling south, it seems every available plot of land is now home to soaring towers promising luxurious living and, more importantly, lucrative rental returns. This promise of passive income has been the primary driver of this construction boom, with developers aggressively marketing these units to both domestic and international buyers as investment vehicles rather than permanent residences.
The fundamental issue is that very few people genuinely choose to live in these condominiums in Phuket. Unlike Bangkok, where a significant portion of the condo market caters to the city’s vast working population, Phuket’s condo boom is overwhelmingly geared towards short-term rentals. This reliance on the rental market creates a precarious situation. When the supply of rental units far outstrips demand from tourists and expatriates, the promised high yields fail to materialise, leaving investors struggling to find tenants and, consequently, an exit strategy.
Compounding this problem is the recent reaffirmation by the Thai Supreme Court regarding the legality of so-called ‘30+30+30’ leasehold agreements. For years, many foreign buyers in Thailand, legally barred from owning freehold land outright, have purchased properties under the guise of these extended lease arrangements, believing they secured long-term tenure. However, the Supreme Court has unequivocally ruled that such agreements, which essentially lock a landowner into successive 30-year leases, are not legally sound and cannot be enforced as such from the outset.
This landmark ruling has sent shockwaves through the Phuket property market. Foreign buyers who previously believed they had a pathway to near-permanent residency through these leases are now confronted with the reality of a maximum 30-year lease, with no guarantee of renewal. This significantly impacts the desirability and, crucially, the resale value of these properties. Who, after all, would willingly purchase a property with a finite lifespan, knowing that its future beyond three decades is uncertain and its resale prospects severely limited?
The convergence of these two factors – the oversupply of new condominiums and the legal clarification on leaseholds – paints a bleak picture for Phuket’s resale market. Just as in Bangkok, where countless older condominiums languish on the market, unable to compete with the shiny allure and often aggressive pricing of new developments, Phuket’s older properties, particularly those sold under the now-discredited 30+30+30 premise, are facing an uphill battle.
Potential buyers are now faced with a stark choice: purchase a new condominium, adding to the already saturated rental market and accepting the inherent risks associated with fluctuating tourism and the uncertainty of future rental yields, or consider an older property with the knowledge that resale will likely be incredibly challenging due to the overwhelming availability of newer stock and the leasehold limitations.
The dream of easy returns and a sun-drenched retirement in a Phuket property is rapidly fading for many. The island’s development boom, fuelled by short-sighted investment promises and legally dubious lease structures, has inadvertently laid the groundwork for a resale market rot that mirrors Bangkok’s long-standing struggles.
The drive back from the capital this time was less about comparing two different types of Thai craziness and more about contemplating whether Phuket’s once-vibrant property market has irreversibly traded its paradise appeal for a Bangkok-style condo conundrum. The long-term consequences for the island’s economy and its appeal to international buyers remain to be seen, but one thing is clear: the golden age of Phuket property may well be drawing to a close.
Simon Causton is a long-time Phuket resident, founder of Citadel Phuket and author of ‘The Phuket Periodical’ newsletter. X (Twitter): @SimonCauston