In recent years Phuket’s property rental market has been very strong, with rental prices increasing across the island and providing owners with very attractive returns on their investments.
That recent strength has coincided with increasing tourist arrivals to the island, which has led to demand for rental properties outpacing supply. Good rental properties have become scarce as tenants have renewed leases or entered into long -term leases – sometimes as long as three-years or more. This has made it much harder to source good rental properties on the island.
Recent research from Phuket-based real estate firm Siam Real Estate found the average gross rental returns for Phuket properties to be 5 percent, with rental returns ranging from 3 percent and up to as high as 9 percent in some cases.
Long term rental prices for Phuket ranged from an average of THB 22,000 per month for a two-bed condo to more than THB 200,000 per month for a four-bedroom villa property.
Many property developers in Phuket are offering off-plan buyers guaranteed rental returns. There are a variety of offers ranging from 4 percent net to 9 percent gross over periods ranging from two to 15 years. Buyers would be wise to check the small print when agreeing to rental guarantees, and seek independent legal advice from their law firms as many of those offering very high gross returns actually net down to a much lower figure. This can also be checked through your real estate broker who will be able to provide you with a breakdown of gross returns minus costs.
As highlighted Siam Real Estate’s market report, certain sellers in Phuket are currently in a position where they can offer their properties for sale at a discount to market value due to the appreciation of the Thai baht. With strong conditions in the rental market over recent years, this has enabled buyers to purchase undervalued resale properties and achieve higher than average rental returns on their investment. Some owners have been able to achieve gross returns of 8 percent per annum or more. This is in stark contrast to other markets in the region, such as Singapore and Hong Kong, where gross rental returns average less than 3 percent per annum.
Properties in Thailand do not only yield higher returns but also cost less!. Figures taken from the Global Property Guide show Thailand’s property market has fantastic value on a cost per sq.m basis when compared on a regional and global basis.
With average capital appreciation standing at 30 percent for those buyers who purchase during the pre-construction phase of a property development, according to Siam Real Estate, many property speculators look to buy early. An additional benefit is that these buyers have the choice of the most attractive units.
When buying at the pre-construction phase it is advisable for buyers to conduct a thorough due diligence on the developer, checking the developer’s history, whether the developer has got the correct permits to build the condominium, how the development is being financed, etc. There are many experienced property developers in Phuket, both large Thai listed developers and local developers. Buying at the preconstruction phase offers buyers a great opportunity to make an attractive capital gain.
The future of Phuket’s economy is very bright: the growth in airport arrivals at Phuket International has been extremely strong and looks set to continue with the airport expansion close to completion. This clearly shows the resilience of Phuket as a number one tourist destination in Southeast Asia. Phuket is investing heavily in its infrastructure and tourism sector, investment is being driven by government and private sector spending, all of which bodes well for the future of the paradise island.
For more information about this article contact Kevin Hodges, the North Branch and Investments Manager for Siam Real Estate in Phuket and author of Saim Real Estate’s Phuket Residential Market Research Report. He has more than six years’ experience in Phuket’s real estate market.
