Buying Condos in Phuket: The Ultimate Guide

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Phuket is an amazing holiday destination and is fast becoming one of the world’s most visited islands. In 2018, Thailand attracted nearly 35 million visitors and almost one third of those spent time in Phuket.

And the amount of travelers is expected to rise significantly in the coming years.

There’s a prediction that mainly Chinese will flood the Phuket real estate market as they struggle with property prices back home. They’ve also become more aware of the opportunities to buy overseas property to use as investment vehicles.

Yet, before you buy real estate in Phuket, it’s important that you get your feet wet and learn about the market, where to buy, about prices, and more.

In this article, you’ll about learn the following:

• Phuket’s property market
• Phuket property prices
• Which nationalities buy real estate in Phuket?
• What is a condotel?
• What are the benefits of buying a condo in Phuket?
• The best areas to buy real estate in Phuket?
• Phuket real estate agents

Phuket’s property market

Real estate prices have increased much in Thailand, and particularly in Bangkok and Phuket over the last decade.

In comparison to Bangkok, Phuket’s real estate market relies heavily on foreign buyers that primarily come from from China and Russia. We also see a big demand among European and Australian buyers, but it’s a fraction compared to the first two mentioned countries.

Thailand’s property market has slowed down since January 2016, after a continuous growth over the 10 past years. Still, Phuket’s market performs surprisingly well. As late as February 2019, it had a 12 year high average occupancy rate at 95.4%.

At the same time, travelers and investors visit Phuket in vast numbers. Investment in infrastructure is mainly to thank, for example, the construction of the new international airport.

In 2018, the number of travelers arriving at the airport increased from 1.5 million to 2.1 million, an increase of an astonishing 28%, compared to 2017.

A conclusion we can make is that Phuket is less vulnerable to the national economic climate and its policies, even if it has some impact, of course.

With increasingly more tourist arrivals, and foreign property buyers who look for lucrative investment opportunities, Phuket can break new records even during national crisis.

Phuket’s property market has continued to remain strong over the past 20 years and after events such as:

• The Asia Crisis
• The SARS Virus Outbreak
• The Bird Flu Outbreak
• The The Indian Ocean Tsunami
• The 2006 Coup d’Etat
• The Global Financial Crisis
• The 2014 Coup d’Etat

The market keeps being buoyant and is particularly interesting for long-term investments.

Phuket’s rental market

Recently, many buyers have started to look for short- and long-term investment vehicles in Phuket, such as condos, villas, and condotels (more about that later). You’ll find developers who offer high guaranteed rental yields, sometimes stretching up to 12%.

Previously, it was common that developers built large apartments and condos, with floor areas of 100 square meters or more. These apartments were often used to cater western expats, or wealthy Thai investors.

Nowadays, Chinese investors often look for smaller and cheaper units in condos and condotels, to use as investments. In fact, buying a unit or more in a condotel can be a great income generator, and a better alternative than keeping your money in a bank account.

You’ll get passive incomes and can let someone else manage the property for you. You don’t even need to be present in Phuket, as the condotel staff helps you to rent out your property.

Phuket property prices

Real estate prices have increased immensely in Thailand’s major cities over the past decade.

As late as 2013, condos were priced below THB 100,000 per square meter in Bangkok’s most central areas. Nowadays, condos are priced well above THB 200,000 per square meter, and sometimes up to THB 300,000 per square meter.

We’ve seen similar price increases in Phuket, yet, property is comparably cheap, even on the west coast. Real estate is priced at around THB 100,000 per square meter here, while prices go down to around THB 50,000 in the central parts.

If you look for prime property, might it be villas or condos, units are often priced above THB 100,000 per square meter.

Will property prices increase in Phuket?

Anyone who knows a little about islands, property, and economics will know that the long term outlook for Phuket property is favourable.

Phuket is an island, and land on any island is in limited supply. At some stage in the future, all the available land for development will be used up. That is when land prices in Phuket will shoot through the roof.

Until then, discerning buyers who bought at the right locations from the right developers will still see the value of their property rise in value.

Inflationary pressure will push up the cost of the land, bricks and mortar, fixtures and finishings, and even the cost of landscaping. As this happens, the potential rental generated by the property will gradually increase, too.

Property has always proven to be a sound investment anywhere in the world, and in that respect Phuket is no different. And any risk-averse investors have the benefit that in Phuket (in fact, throughout Thailand) there is no leveraged buying (i.e. no borrowing) by foreigners.

This is a cash only market with fewer than 1% of foreign buyers obtaining financing, and even then the loan is coming from their home country, not locally in Phuket.

This lack of leverage mitigates the impact of boom-bust scenarios seen in other countries, especially those markets which spectacularly blew up in 2007-2008.

The market in Phuket is not cyclical. Instead, average real estate prices in Phuket tend to rise gradually, by around 3-4% annually.

Which nationalities buy real estate in Phuket?

Buyers of Phuket property come from all over the world. Europeans, Russians and Chinese make up the bulk of investors in Phuket, but many expatriates working throughout the Asia Pacific region also buy here.

In addition, residents of neighbouring countries, such as those in Malaysia and Singapore, are also major purchasers.

According to some industry experts, American buyers are expected to pick up in the years ahead as the number of tourists from the US increases.

The dramatic increase of Chinese property buyers

The industry has been focused on the Chinese market for the last few years, and apart from the occasional hiccup (such as the boat disaster in 2018 which saw numbers drop off), we are still expecting to see Chinese arrivals increasing in the years ahead.

The attraction for Chinese buyers is easy to see. Quality properties in China today are at unaffordable levels for many Chinese nationals, so most middle class Chinese are priced out of their own market.

Phuket, on the other hand, remains extremely affordable for them.

Comparable properties in Phuket are cheap, and Chinese nationals visiting the island see much better value-for-money investing in Phuket than they do from investing at home.

The increase of Indian travelers and property buyers in Phuket

The next potentially major buying group could come from the Indian subcontinent. As things stand now, India has the seventh largest number of tourists to Thailand each year, but Indians have not been coming to Phuket in large numbers because there have never been direct flights.

However, 300 million middle class Indians can now fly directly to Phuket with GoAir, which is already operating direct flights from both Delhi and Mumbai.

As this market evolves, we could see many more Indian visitors, and we expect that will translate into many more Indian real estate buyers.

What is a condotel?

I spoke about condotels earlier in the article, let me explain what a condotel is, in case you’re not aware about this term. In short words, condotels can be defined as hotel-licensed condominiums.

Many people may be familiar with this concept, especially in the US. Individual units can be privately purchased, but instead of being used for residential purposes, they are rented out as short-term hotel accommodation.

A condotel is a hybrid species and combines the condominium ownership rights for foreigners with the legal operations license and full services of a hotel.

Most foreigners buying into a condotel development in Phuket are usually interested in the investment opportunities of the purchase, rather than looking for a holiday home.

The issue with unlicensed condotels in Phuket

There is some controversy right now because many condominium developments are calling themselves a “condotel” or market themselves as hotels, but they do not possess the necessary license to operate as a hotel.

Any condominium offering hotel services without a hotel license is, in fact, operating illegally.

The law states that the correct licenses must be obtained if a resort is marketing and renting out rooms for terms shorter than 30 days. It’s a common practice that shorter-term rentals are illegal in Thailand if you don’t have a hotel license.

Still, many condominium projects that offer guaranteed returns are basing these largely on the short-term rental market.

Unfortunately, many of the condominiums in Phuket failed to follow the correct procedures, did not receive the correct legal advice, or were simply hurried into development before establishing themselves as an actual Condotel.

The Condominium Act and the Hotel Act

A bonafide condotel legally complies with both the Condominium Act and the Hotel Act in Thailand, and because it has a hotel license from the authorities, it is allowed to rent out its units on a daily or weekly basis.

This type of establishment usually employs a branded hotel management company, to run the resort.

The obvious attraction to a foreigner looking for a sound investment is that they have full legal ownership of a condominium unit, while being legally allowed to generate an income on their unit through a professional hotel management company.

In this way, they get a “double whammy”.

They can invest in Thailand’s buoyant property market, while simultaneously capitalising on its booming tourism industry. And they can usually come to Phuket a couple times each year to enjoy some “free” accommodation in their resort.

What are the benefits of buying a condo in Phuket?

Foreigners cannot own land in Thailand, so instead they are attracted to the legal full freehold ownership of a condominium. As long as a condominium resort has 51% Thai owners, foreigners may own the other 49%.

Owning a condo in Phuket (or anywhere in Thailand) is a clear-cut legal way for a foreigner to invest in the Phuket real estate sector.

The beauty of a freehold condominium for any foreigner is that ownership is permanent and in perpetuity until the owner decides to sell it.

A quality resort condominium typically has one or more swimming pools, restaurants, a gymnasium, sauna or steam room, beautifully landscaped gardens, a car park and very often will also have a reception area. Condos really do have all the comforts of home – sometimes even more.

Buyers should ensure that the condo they are purchasing is a freehold and not a leasehold, as leasehold condos do not have the same ownership rights, and may be extremely difficult to sell at a later date.

Phuket’s condominium turnkey solutions

One of the major draws for foreigners looking at Phuket real estate is the ease of ownership. A turnkey solution or service means that the developer will take care of the full property management services of the condominium unit after purchase.

Most condominium resorts also offer a rental guarantee with a guaranteed return. Under such an arrangement, the purchaser is allowed to stay in the resort for anywhere from 2 to 4 weeks per year.

However, there is no need to worry about any maintenance, the paying of bills or any of the other usual hassles associated with home ownership. Instead, the resort management takes care of everything, including the rental of the unit, and the owner just receives a return each year.

Upon expiration of the guaranteed return period, owners may then enter a rental pool system whereby they receive a share of the rental income generated from the overall rental business.

The best areas to buy real estate in Phuket

Choosing a location needs some thorough planning and it all comes down to your personal preferences and goals. What appeals to some buyers, is a no-go for others.

For some, the distance to the airport matters, especially for someone commuting to work in Bangkok, or a nearby country, who only returns to Phuket on weekends. If you fit in this profile, then the northern parts of Phuket might be your choice.

Some people love the east coast because it is relatively undeveloped, it’s close to all of Phuket’s marinas and it has some stunning views across Phang Nga Bay.

The central valley, which we also call the Kathu Valley, is very green, with some unspoiled jungle, a few golf courses and geographically well situated in between the west coast and Phuket Town.

But for those focused mainly on rental income, then the west or south coasts are the easiest to rent out, and this is where property sells for premium prices. Anyone who loves the beach, crystal clear aquamarine seas, and sunsets will prefer this part of the island.

The west coast includes (from north to south):

• Mai Khao Beach
• Nai Yang Beach
• Nai Thon Beach
• Layan Beach
• Bang Tao Beach
• Surin Beach
• Kamala Beach
• Patong Beach
• Tri Trang Beach
• Karon Beach
• Kata Beach
• Kata Noi Beach
• Nai Harn Beach
• Rawai Beach

Obviously, properties with sea views in these areas demand the best rental returns.

Below I’ve listed some of the most popular areas when foreigners decide to settle or buy real estate.

Buying condos in Patong (Kathu)

Patong is both a 3.5 km long beach and a town, located in the north western parts of the island. It’s considered to be the most bustling area in Phuket and started to cater westerners from the late 80’s.

If you go to Phuket, you’ll probably end up here from time to time.

Buying condos in Thalang

Thalang is a big area and located in the northern parts of Phuket. It’s getting increasingly popular among condo developers.

The international airport is located in Thalang district, making it convenient when settling in and departing.

Buying condos in Mueang

Mueang is the capital district and located in the southern parts of Phuket, Phuket Town is located in this area.

It’s considered to be one the most bustling areas in Phuket. Dinings and alcohol are generally more expensive around Phuket Town.

Phuket real estate agents

There are a number of real estate agents in Phuket and like in every industry, there are good ones and bad ones.

Many real estate agents try to market their properties using high pressure sales techniques, similar to the timeshare industry. It’s best to avoid this type of sales strategy as you may end up being forced into a purchase that you’ll soon regret.

Perhaps, the first thing you should do when buying property in Phuket is to find an experienced lawyer. Good legal representation is highly important. It would even be wise to get legal guidance, before even looking at properties.

Take your time to find honest and reputable real estate advisor. A good company will always have your best interest at heart, and will mentor and educate you on the pros and cons of buying Phuket property.

You should also ask what due diligence they carry out on the properties they offer to investors. If the answer is none, then you know where their interests lie.

Some of the most popular real estate agents in Phuket are:

• Thai Residential Co .Ltd.
• Phuketcondo.net
• Siam Real Estate Phuket
• St. James Properties
• Abyss Phuket
• JFTB Real Estate Phuket

Conclusion

The number of tourists visiting Phuket has been rising consistently for many years, and it is easy to see that tourism is the key driver of the property sector.

The revenue that the tourism industry produces for the island has allowed the authorities to spend billions on infrastructure improvements, including a new airport. This has allowed the island to keep pace with the ever-increasing numbers of foreign arrivals.

Not only is the island experiencing a rapid modernisation, the growth of the tourist industry is also attracting vast amounts of private investment into new attractions, from water parks and ice rinks to shopping centres and luxury hotels.

And all this investment is paving the way for future growth in the tourism sector. No doubt the real estate industry will also be a beneficiary of this growth. Buyers with a medium to long-term view will benefit from capital appreciation, as well as achieving a good source of rental income over the years that they stay invested.