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Peggy Sito

Buyers from Hong Kong and the mainland are joining the rush from Europe to buy villas in the holiday resort

Blessed with white, palm-fringed beaches, blue seas and magnificent views, the popular holiday resort of Phuket, in Thailand, attracts thousands of tourists every year.

Meanwhile, as the visitors enjoy the sun, sand and surf, international hoteliers and retailers are taking advantage of the waves in the tourism business and the property market.

Seduced by Phuket's beauty, visitors are snapping up multimillion-dollar luxury villas to be used as holiday or retirement homes or to serve as investments.

The island resort is attracting not only the international strata of the super-rich but also middle-income earners from Japan, Hong Kong and China.

At 540 square kilometres, Phuket is about the size of Singapore and is Thailand's second most popular destination after Bangkok. About 3.5 million tourists have visited the island each year for the past three years. More than half are repeat visitors.

Tourism  accounts for 68 per cent of the island's gross domestic product.

International hotel chains, such as the Hilton International, Conrad and Raffles, are making their presence felt with announcements of plans to build hotels and luxury villas on the island.

Along with the hoteliers  come the shopping mall giants. Tesco, Central and Big C are building high-end retail arcades in Phuket.

Meanwhile, famous restaurants are arriving on the scene and setting up shop.

Estate agents  say the new developments and the inflow of foreign capital  is transforming the once relatively quiet island into a bustling resort, and this in turn  is benefitting the local property market.

Phuket's property market is in its infancy; real development got under way only about seven years ago.

Although market performance is not backed by official figures, Philip Nourse, executive director of property consultant Chesterton Petty, says demand is on the rise and  developers are selling off most of what they build.

Mr Nourse's company is selling the luxury villa development Ayara Baan Thai Kamala in nearby Patong on behalf of client company Southern Land Development. Each villa  starts from  US$2.5 million.

The majority of buyers of luxury villas in Phuket are Hong Kong expatriates,  mainly British and US passport-holders.

'About 55 to 60 per cent of buyers in the Phuket market are from Hong Kong,' said Stephen O'Brien, managing director of the Phuket office of Knight Frank Chartered (Thailand).

And Hong Kong residents continue to enter the island's property market, Mr O'Brien said.

To attract more Hong Kong buyers, developers will  market their projects here at the Phuket & Samui property exhibition, to be held from Friday to Sunday at the Hong Kong Convention and Exhibition Centre in Wan Chai.

Buyers from Europe are also emerging as a strong market force, especially  British, Dutch, French and German investors.

Ancient trading links between some of these countries and the Far East have kindled interest in the possession of property in this part of the world. The growing interest has pushed up activities by 23 per cent this year, compared with the same period last year, Mr O'Brien said.

Prices in Phuket were also up over the past year.

'If you bought a house last year, you double the price today,' Mr Nourse said.

Amy Rodil, research director of CB Richard Ellis (Thailand), said competition in the Phuket market was strong. The new wave of villa developments began only three years ago.

As of August this year, more than 500 high-end and luxury villas in over 35 projects  have been on the Phuket market, said CB Richard Ellis (Thailand).

The projects are in various stages of development, with about 30 under construction. Only five villa projects have been completed, and they are all sold.

International developers include Laguna Resorts & Hotels, which is building luxury homes priced from 20 million baht (HK$3.83 million) while publicly-listed Thai property developer Charm Issara is developing Sri Panwa, a villa project located on the hillside slopes of Cape Panwa.

The project has a total of 31 villa units on a 57 rai (9.2 hectares) land area.

Estate agents said it was good to see more professional developers  involved in the Phuket property market.

Ms Rodil said that, interestingly, while there was a sufficient supply of high-end properties, developers have been broadening the scope by building cheaper houses and apartments priced from US$100,000 to US$200,000 per  unit. These units are designed to appeal to middle-income earners.

'The rich buyers look at high priced luxury villas. Now developers are building lower-end products to broaden market types,' she said.

Ms Rodil said the potential of the lower-end market was huge because it was attracting Europeans, Japanese, Hong Kong and mainland buyers.

Meanwhile, locals  prospering  under a growing Thai economy  are also buying holiday homes in Phuket,  Ms Rodil said.

Thailand's  real gross domestic product growth rate has been on the rise  since 1999. Last year it reached 5.2 per cent, against 2 per cent in 2001.

The average monthly total income per household rose 10 per cent to 13,418 baht (about HK$2,570) in 2002.

The re-sale market - a key barometer in gauging a property market's maturity -  was expanding rapidly as local Thais become active in the field.

An increasing number of buyers were emerging purely as investors looking for a rental yield of 10 to 14 per cent per year. Property consultants are optimistic the  market will continue to improve and that  infrastructure will match the pace of development.

Last week, the Thai government announced plans to make Phuket the aviation hub  of southern Thailand when it approved  a  US$18.77 million fund to expand  a runway at  Phuket International Airport.

'It is very difficult to predict property price movement in Phuket, but I expect prices to be up by 10 per cent plus next year,' Mr Nourse said.

TIPS FOR BUYERS

Make sure the developer has the  funds to complete the project and the land title is genuine

Check on the design of the units, their location and the condition of the road leading to the site

Make sure the ownership scheme is straightforward

Foreigners may not normally own land without a  Thai partner; leases are usually granted for 30 years, with an option to renew for 30 years



Investors see Phuket as dream destination