The broader Thai economy is in a precarious state, burdened by soaring household debt and an oversupply of property. The strong baht is also hurting exports, further compounding the economic woes.
Several local agents have confided in me this week that interest in anything but the most budget-friendly apartments has evaporated, leaving them with a glut of unsold properties. Even the rental market, which should be buzzing as we approach the high season, is worryingly quiet.
Phuket’s property market has defied gravity in recent years, fueled by a surge of Russian buyers fleeing the war and remote workers from Singapore and Hong Kong seeking a convenient base in the region. However, the tide seems to be turning.
WHAT’S DRIVING THE CHANGE?
Several factors are conspiring to dampen the once-booming Phuket property market:
- Russians Returning Home: As the initial panic subsides and the allure of living abroad fades, many Russians are heading back home or seeking cheaper alternatives in Southeast Asia. They are also finding it harder to bring money into the country with increased restrictions on transfers of rubles into the country.
- Oversupply: An estimated 100,000 new units are expected to flood the market next year, intensifying competition and driving down prices. The situation is further exacerbated by unrealistically high asking prices for many villas and apartments. Two-bedroom villas in Cherng Talay are now listed for a staggering B25 million, while four-bedroom villas routinely command prices exceeding B55 million. While such prices may be achievable in a booming market, they now seem driven more by greed than reality.
- Overdevelopment: Phuket’s rapid transformation from a tropical paradise to a sprawling metropolis is eroding its appeal. Increased pollution, dirty beaches and chronic traffic congestion are tarnishing the island’s image. One shudders to think what the situation will be like when the tourist hordes descend in November.
- Natural Disasters: This year’s floods and landslides serve as a stark reminder of the risks associated with unchecked development and inadequate planning. Mother Nature can’t be solely blamed for these disasters; human actions have played a significant role in altering the landscape and increasing vulnerability.
- Global Economic Uncertainty: The growing spectre of a global recession is making investors hesitant and reducing demand for overseas property investments.
THE DOMINO EFFECT
The confluence of these factors is creating a precarious situation for Phuket’s property market. Many investors were enticed by promises of 7% rental returns, but if developers fail to deliver, defaults and bankruptcies could trigger a chain reaction. Unfinished projects and a repeat of the last property crash, which left the island scarred with abandoned developments, could become a reality once again.
Perhaps this downturn is a necessary evil, a chance for the island to take a breather and recalibrate. It may be time to embrace a period of tranquillity before the next boom inevitably arrives.
A WORD OF CAUTION
While this article paints a somewhat bleak picture, it’s important to remember that the future is inherently uncertain. There are still pockets of strength in the market, and some developers and agents remain cautiously optimistic. However, the warning signs are undeniable, and anyone considering investing in Phuket property should proceed with caution and do their due diligence.
As for me, I’ll just brace myself for the inevitable onslaught of angry messages and threats. But hey, someone has to speak the truth, even if it’s uncomfortable.
Simon Causton is a long-time Phuket resident, founder of Citadel Phuket and author of ‘The Phuket Periodical’ newsletter. X (Twitter): @SimonCauston