Why Foreigners are Investing in Phuket Property

Phuket has a lot going for it

For starters, it is a tropical island with some of the world’s most beautiful beaches. This fact alone attracts over 10 million tourists to Phuket every year. Over the last 20-30 years, however, Phuket has become more than just a holiday paradise. It has become home to tens of thousands of professionals, young families and retirees.

The simultaneous growth in tourism and foreign residents has seen a corresponding growth in the Phuket Property market.

But what are the positives for Phuket going forward?

And why are so many foreigners investing in Phuket Property?

The obvious one is Tourism.

The tourist industry in Thailand is an extraordinary success story. According to a UN World Tour-ism Organization report released in 2018, the revenue Thailand generates from tourism is the 4th highest of any country in the world. With US$ 57.5 billion in tourist receipts per year, Thailand falls behind only the United States, Spain and France. But it ranks ahead of countries like the UK, Italy and Australia.

This is even more remarkable when you consider Thailand only ranks 10th in terms of total tourist arrivals (35.4 million). In fact, of the seven countries which make the top 10 in both categories, Thailand’s average income per tourist is higher than every country except the United States.

On top of that, Thailand has a lower GDP per capita than every country ranked above it for either total receipts or total tourists. Not surprisingly, tourism makes up about 20% of the country’s GDP.

Most people who buy a property in Thailand do just not pick the country from a world map and say, “That’s the place!” and in Phuket especially, they are introduced to the island because they originally arrived as tourists.

The strength of the tourist market is clearly a big plus for Phuket Property sales.

The first big wave of foreigners who bought property in Phuket were married to Thai nationals.

While tourism is certainly bringing people to live in Phuket today, the largest percentage of buyers 20-30 years ago were people who were married to Thai spouses.

Landed property in Thailand may only be purchased by a Thai national, and this law is not new. Foreigners who were married to Thais, and who had decided to settle in Phuket began buying villas and bungalows.

There are still a number of foreigners with Thai spouses, and you will find that they often seek out landed property. Spouses who want to diversify their holdings so that the foreigner also has property in their name, however, will also look at condominiums.

This dynamic is obviously great news for both the villa/bungalow and the condo markets.

What about the prices in Phuket (and Thailand in general)?

The contrast between prices between Thailand and cities such as New York, Sydney, Tokyo, London or Paris does not tell the whole picture. These are obviously some of the most expensive places in the world to live. That's why we have compared Phuket's average consumer prices, condo prices and cost of living to a few cities which are generally listed among "expensive" places to live. (But we did leave New York - just for the stark contrast.)

Property prices in Phuket are: 16.72% lower than in Bangkok 36.79% lower than in Pittsburgh 25.28% lower than in Liverpool 29.10% lower than in Cologne 32.98% lower than in Adelaide 1.62% higher than in Beijing 4.13% lower than in Prague 53.90% lower than in New York

The Phuket Property Industry is gaining international exposure

As mentioned above, visiting as a tourist is most people’s first exposure to Thailand and to Thai Property. But foreign buyers of Phuket properties are not only holiday-makers.

International property shows now regularly feature villa and condo developments in Bangkok and Phuket. Local real estate advisors also ensure that their client’s property receives international exposure, whether that property is being offered by a new developer or it is a resale by a private client.

The world may not literally be getting smaller, but when it comes to the international property market, it is certainly becoming more interconnected.

Changes to one of Thailand’s historic demographic constants is accounting for some of the increased demand in Phuket Property.

The influx of foreign buyers in Phuket – both those coming here to live, as well as those purely looking at investing opportunities – are not the only ones contributing to Phuket’s population growth.

For centuries, multiple generations of Thai families lived together in a single home, or a compound of homes. It was accepted that, when children went off to work, they would either continue living in the home, or if they moved, that their parents would move in with them.

Today, however, many younger Thais are “moving out” and buying their own houses or condominiums. This trend is certainly reflected in the population growth in Phuket which, at circa 7.4% per annum, is a higher rate than that seen in most regions of the country.

In addition to that, the growing wealth among the older generation in Thailand means that many have capital to invest in the property market. A number of wealthy Thais have created property portfolios which include villas and condos in Phuket.

The property market in Phuket is benefiting from both of these trends.

The long-term stability of the Phuket Property market makes it a very attractive place to invest.

One of the main reasons for that stability is this: there is virtually zero lending to foreigners buying Phuket property.

The financial crisis that threatened to melt down global markets in 2008 all started with a mortgage crisis. While complicated financial instruments played their role, the root cause was mortgages which the borrowers could no longer afford.

And the willingness to lend money to those “high risk borrowers” in the first place started a bubble in property which popped when interest rates started to rise.

Because foreigners are prevented from borrowing money for property in Thailand, the industry in Phuket is almost entirely a cash business. Without the lending, there is no risk of default. Without the defaults, there is no boombust scenario to play out in Phuket.

In Summary

Tourism may be driving the property market in Phuket, but shifting demographics and the ongoing infrastructure improvements both point to strong prospects for Phuket property as a long-term investment.

One thing is plain: foreigners are investing in Phuket property, either as homes or as rental properties, and the market remains buoyant.