"Phuket" A City Worth Investing In, Comparable to Silom-Sathorn

"Phuket" is another location that investors should keep an eye on. As a popular tourist destination, the growth of condominium prices in this area is quite interesting, showing growth rates similar to those in Silom-Sathorn. TerraBKK Research delves into investment opportunities in Phuket with three main points as follows:

1. Overview of the Condominium Market in Phuket

When examining the condominium market in Phuket, TerraBKK Research categorizes the analysis into three main zones: Kathu, Thalang, and Phuket Town, each with its own unique features and characteristics:

This zone is known for housing the most famous tourist attractions in Phuket, including Patong Beach, the most renowned beach in Phuket, Kamala Beach, and various adventure attractions such as Phuket Water Ski, shooting ranges, and the entertainment highlight of this zone, Phuket Fantasea, making it a primary destination for tourists. Recently, in the 2016 Traveller's Choice - Best Destinations in the World survey by TripAdvisor, Kathu was ranked as the second-best tourist destination in Thailand, following Bangkok.

Resale condominiums in this zone are priced around 50,000-120,000 THB per square meter, and if rented out, the monthly rental price ranges from 18,000-70,000 THB. For daily rentals, the price can be 4,000-7,000 THB per day, depending on the season.

Thalang Zone: The Transportation Hub with Phuket Airport and Connection to Phang Nga

This zone is highlighted by Phuket Airport and the Thep Krasattri Bridge, which serves as the main access point to Phuket. This makes Thalang a key transportation hub. Additionally, it features tranquil tourist attractions suitable for nature lovers, such as Nai Yang Beach, Nai Thon Beach, Mai Khao Beach, Bang Pae Waterfall, Ton Sai Waterfall, Wat Phra Thong, and Wat Phra Nang Sang, among others.

Resale condominiums in this zone are priced around 80,000-110,000 THB per square meter, and if rented out, the monthly rental price ranges from 12,000-120,000 THB. For daily rentals, the price can be 5,000-9,000 THB per day, depending on the season.

Phuket Town Zone: The Center of Major Shopping Malls and Retail Centers

Although it lacks the tourist attractions of other zones, it is known as a zone where major shopping centers are opening, including "Central Phuket," the largest and most modern shopping center on the island, King Power, featuring over 100 luxury brand shops, and The Mall Group, which is preparing to open the "Blue Pearl" Luxury Shopping Center, aiming to make Phuket a global destination. This project is currently attracting attention from investors nationwide for its World Class investment.

Resale condominiums in this zone are priced around 55,000-120,000 THB per square meter, and if rented out, the monthly rental price ranges from 10,000-70,000 THB. For daily rentals, the price can be 3,000-5,500 THB per day.

When comparing rental yields, TerraBKK Research distinguishes between two scenarios due to Phuket's status as a tourist city, which may lead to different rental agreements.

Option A: Rental is only possible during the High Season, which allows for rentals for 6-8 months per year, specifically during the tourist season.

Option B: Rental is possible for a full 12 months, allowing for a one-year lease agreement.

This results in different returns for each zone as follows:

It can be seen that the Kathu zone offers the highest returns, being the main tourism center in Phuket. When discussing tourist attractions in Phuket, “Kathu” is one of the top destinations chosen by both Thai and foreign tourists when visiting Phuket, whether it’s Patong, known for its nightlife, or adventure spots that attract many foreigners.

Moreover, due to its status as a tourist destination, Phuket has a unique rental characteristic, allowing for daily rentals at rates comparable to 3-5 star hotels in Bangkok. Each zone and season varies as follows:

For daily rentals, regardless of the season, Thalang is the zone that can command the highest daily rental rates, especially around Nai Thon Beach, Bang Tao Bay, and Surin Beach, which are increasingly popular natural tourist spots and conveniently located near Phuket Airport. Overall, during the Peak Season, around New Year (December-January), daily rentals can reach approximately 4,000-15,000 THB. Following that, during the High Season (the winter months for foreign tourists, October-November and February-April), daily rentals can range from 3,000-12,000 THB. Even during the quietest Low Season (May-September), rentals can still be around 2,000-9,000 THB.

From the overall picture, it can be said that Peak Season and High Season rentals can be 30% higher than during Low Season.

2. Growth of Condominium Prices Over the Last 4 Years

The team at TerraBKK Research has surveyed the resale condominium prices on Phuket Island over the past four years and found interesting data indicating that Phuket is a city where condominium prices have risen dramatically. Overall, Phuket has seen a resale condominium price growth of about 10% per year, with the Kathu zone experiencing the highest growth at 3-15% per year, followed by Thalang at 5-9% per year, and Phuket Town at 3-7% per year. It is evident that, due to Phuket's status as a tourist city, the advantageous zones are typically the popular tourist areas like Kathu and Thalang, which have the highest condominium price growth.

3. Growth Rates, Rental Prices, and Returns Comparable to Silom-Sathorn

From the data collected by the TerraBKK Research team, it can be concluded that Phuket is a location that can "be compared to Silom-Sathorn quite well", whether in terms of monthly rental prices, rental yield rates, and the growth of resale condominium prices, making it a strong competitor to Silom-Sathorn. TerraBKK Research presents a graph for clearer visualization:

3.1 Growth Rate of Resale Condominium Prices

From the graph below, it can be seen that the growth of resale condominium prices in Phuket, despite fluctuations due to economic conditions, has overall grown at a rate of 7% per year, which is considered high compared to Silom-Sathorn, which grows at 5% per year.

However, caution should be exercised when purchasing condominiums in Phuket for long-term speculation, as even though the overall growth is high at 7%, other factors should also be considered, such as economic conditions and the tourism situation in Thailand, since Phuket is a tourist city, and property prices will fluctuate based on various factors, unlike Silom-Sathorn, which is a crucial business center in Thailand, where prices, although not growing as dramatically as Phuket, continue to rise steadily. Therefore, anyone considering purchasing a condominium for speculation should wait for the right timing to determine if it is the right time to sell for profit.

3.2 Rental Prices and Returns from Rentals

When comparing rental rates between Phuket and Silom-Sathorn, it is found that Phuket's rental rates differ only slightly from those in Silom-Sathorn, with Phuket having rental rates of approximately 20,000-70,000 THB per month (or about 350-550 THB per square meter per month). In contrast, Silom-Sathorn has rental rates of approximately 25,000-65,000 THB per month (or about 550-750 THB per square meter per month). While the overall rental prices may seem similar, when calculated per square meter, Phuket may appear at a disadvantage due to larger room sizes, focusing on residential living for relaxation, unlike Silom-Sathorn, which features smaller rooms aimed at urban living close to public transport.

However, in terms of rental returns, Phuket remains a strong competitor to Silom, being the number one tourist destination in Thailand, especially during the High Season when the island is almost fully occupied by foreign tourists. This makes renting out condominiums in Phuket not particularly difficult. As mentioned earlier, Phuket experiences both High Season and Low Season, necessitating separate considerations:

Base Case: Rental is only possible during the High Season, which lasts for 8 months. In this case, Phuket's returns will be slightly higher than Silom-Sathorn, depending on the location of the condominium and whether it is situated in a popular area. The Rental Yield may be even higher, as during the High Season or Peak Season, rental prices can exceed normal rates by 30%, so it is not concerning if the unit cannot be rented for the full 12 months. Best Case: Rental is possible for the entire year, which will clearly yield higher returns than Silom-Sathorn, but securing tenants for a full-year lease may be more challenging.

In addition to the figures mentioned above, another interesting factor is the Mega Projects that enhance Phuket's potential as a city. The potential of Phuket's location has changed significantly over the past year. In September last year, TerraBKK Research published an article titled “Phuket” The Fastest Growing Tourist City. Since then, numerous real estate developers, both public and private, have launched new Mega Projects worth billions of baht, including the gradual unveiling of projects that TerraBKK previously reported. Here are the latest updates on what changes are coming to Phuket and which projects are nearing completion:

1. Phuket Airport Phase 2 and Plans for Phase 3 Expansion

Image Source: AOT Official Facebook Fanpage

Let’s start with Phuket International Airport. The construction of Phuket International Airport has been completed, and it is currently undergoing performance testing to ensure safety and readiness. The airport authority plans to officially open the passenger terminal of Phase 2 on June 1, 2016. The purpose of Phuket Airport is to increase its capacity to accommodate the growing air traffic, making Phuket the “Gateway to the Andaman”. This second phase will increase the airport's capacity from 6.5 million to 12.5 million passengers per year (5 million international passengers and 7.5 million domestic passengers), allowing for 20 flights per hour, increasing parking spaces from 15 to 25, and expanding boarding bridges from 7 to 11, along with increasing parking capacity from 500 to 1,500 vehicles. Naturally, once the airport is operational, the number of tourists coming to Phuket will also increase, leading to higher tourism revenue.

Image Source: AOT Official Facebook Fanpage

In addition, once Phase 2 of Phuket Airport is completed, Phase 3 will commence immediately, with plans to start construction between 2020-2023. The final decision regarding the construction area will be made in 2017. Phase 3 aims to increase passenger capacity to 18 million per year, accommodating flights up to 30 per hour.

Just looking at the projected tourist numbers through the airport expansion, we can see that Phuket's capacity for the future is still vast, especially with the booming tourism industry, evidenced by the continuous influx of Hollywood celebrities visiting every year.

2. Movement of Mega Projects by the Private Sector

In this article, TerraBKK Research provides updates on which Mega Projects have been completed and which are set to emerge, with the following details:

Image Source: www.ikea.com

IKEA Pickup & Ordering Point Phuket: This service center was established to allow IKEA customers to purchase products more conveniently without having to travel to the IKEA store in Bangna. Customers can order and schedule a pickup day or use delivery services, receiving their products within 5 days, along with installation services available on-site.

Image Source: aasarchitecture.com

Central Phuket Phase 2: After the completion of Central Festival Phase 1, the next phase is Central Phuket Phase 2, which has an investment of 6.65 billion THB, covering approximately 63,000 square meters of rental space on a 57-rai plot, with parking for 3,000 vehicles.

Image Source: www.kingpower.com

King Power Phuket: On December 1, 2015, King Power Phuket officially launched its project, covering over 26,312 square meters with modern architecture styled in Sino-Portuguese. The building is designed as a Green Building, focusing on environmental sustainability and energy efficiency. King Power customers can shop for Duty-Free items up to 60 days before their flight or shop without a flight.

Phuket Eye: The giant Ferris wheel is being constructed within the Ramada Chaofa Phuket project by C.A.S. Asset Phuket. The Ramada Chaofa Phuket project covers approximately 33 rai and includes several projects, including Phuket Eye, a Wyndham Group hotel, and a Sino-Portuguese style shopping district featuring street food restaurants, OTOP markets, and a Peranakan museum. This project is set to open in 2017.

Thai and Chinese Investment Groups Collaborate in Phuket: Sukhumvit Property Co., Ltd. is preparing to invest privately in collaboration with Chinese land developers, holding 70% of the shares, with Chinese investors holding 30%, to develop a mixed-use project on approximately 30 rai of beachfront land, including a boutique hotel, shopping mall, erotic museum, and erotic theater. Ground preparation has already begun, with construction expected to be completed by late 2017 or mid-2018, with an estimated investment of around 2 billion THB.

The Giant Ferris Wheel: The world's tallest mobile gondola offers a 360-degree view and aims to become a modern landmark in Phuket, with an estimated construction time of 1 year and 6 months.

3. Korean Model to Transform Phuket into a Smart City

Phuket is being promoted by the government through the National Software Industry Promotion Agency (NIPA) to adopt the smart city model from Incheon, South Korea, as a pilot project to develop Phuket as Thailand's first smart city. Initially, an investment of approximately 430 million THB will be allocated for infrastructure development in Phuket. In the future, Phuket will become an Internet of Things (IoT) city, implementing systems for public lighting control, data connectivity, and providing SIM cards for foreign tourists to track their travels. This development will enhance Phuket's completeness, leading to increased investment and urban development in a positive direction.

4. LRT Light Rail Project by Phuket City Development

The LRT light rail project is being conducted in cooperation with the Office of Transport and Traffic Policy and Planning (OTP). The feasibility study for the project has recently been completed, and the third public consultation meeting has been held. The plan for Phuket's rail-based public transport system will utilize light rail (LRT) with a speed of 100 km/h. The first line will connect Phuket Airport to Chalong Intersection, covering a distance of 60 kilometers with 20 stations, including Thanu Station, Phuket Airport Station, Chalong Station, Thep Krasattri Monument Station, Thung Ka Station, Old Town Station, Clock Tower Roundabout Station, Bang Niew Station, Public Library Station, Stone Bridge Station, Sakdidej Station, Daoruang Station, Wichit Station, East Chao Fa Station, Palai Station, Ban Khok Ton Not Station, and Chalong Station. The investment value is approximately 24 billion THB, with an estimated passenger capacity of 68,000. Currently, it is awaiting the implementation of a public-private partnership (PPP) and is expected to take 3 years to construct, with services commencing in 2021.

All of these Mega Projects are either completed or set to emerge, as compiled by TerraBKK Research, providing readers with timely information to aid in investment decisions. Additionally, there are numerous smaller projects gradually emerging around Phuket. The continuous growth of Phuket's tourism industry clearly indicates that it is a significant and noteworthy destination on a global scale.

Latest Tourist Statistics for Phuket: In 2014, Chinese Tourists Dominate

According to tourist statistics for Phuket, TerraBKK Research found that the number of tourists remained stable from 2013 to 2014 at 10,793,303 people. A closer look reveals that the decrease was primarily among Thai tourists, down -3.66%. However, the number of foreign tourists visiting Phuket has increased, totaling 7,818,271 people, an increase of +1.32%, indicating that Phuket's tourism potential remains attractive to foreigners. The nationality with the highest number of tourists in Phuket is Chinese, reaching 1.27 million, an increase of +12.09% from 2013, the highest increase among all nationalities. The second highest nationality visiting Phuket is Russian, also showing an increase of +4.29% from 2013.

Source: Department of Tourism, Ministry of Tourism and Sports

When examining the overall tourism picture in Phuket, separating Thai and foreign tourists, it is evident that there has been a continuous increase each year from 2009 to 2015, with foreign tourists outnumbering Thai tourists. Analyzing tourism revenue, there is a significant difference between Thai and foreign tourists, with Phuket generating 272.532 billion THB from foreign tourists and 40.474 billion THB from Thai tourists. This is due to the longer duration of stay, higher spending per person, and overall travel patterns of foreign tourists compared to Thai tourists, confirming that Phuket is indeed a popular destination for international travelers.

Source: Department of Tourism, Ministry of Tourism and Sports

In conclusion, “Phuket” is one of the top investment locations in Thailand and a formidable competitor to Silom-Sathorn, due to its investment potential and location advantages. The rapid emergence of Mega Projects further enhances the attractiveness of real estate projects in this area.

Article by: TerraBKK Knowledge Base

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