Out With the New, In With the Old – Phuket's Property Market

Posted: 23 Feb 2008 | 12:00 pm

Whether you are property buyer, seller or developer, it is important to figure out where you stand in the market cycle. Developing markets tend to evolve from a Wild West stage set into a more sophisticated and gentrified, older and wiser urbanite. Risk and reward ratios tend to move counter to these patterns, while at the same time key indicators such as rental yields and capital appreciation stabilize.

Over the past six years, Phuket's demand has continually outpaced supply with capital appreciation averaging more than 20% per annum. In many cases within premium locations, people buying off-plan have seen 50% to 100% returns after 24 to 36 months.Today, a scan of the teeming number of print directory property publications, newspaper classifieds and real estate agency websites shows that resale properties are becoming a market in themselves.

For buyers who were once limited to new products, secondary sales are becoming a market force often displacing initial sales in developments. For existing villa, condominium or apartment owners who are contemplating a property transaction - to either take profits or upgrade their investment - the ground rules are evolving.

Local industry commissions were once 3% as a rule of thumb, but now minimum rates of 4%-6% are being levied for individual properties. The trend for many of the large, internationally-affiliated agencies and established local operations is to focus on the premium villa and lifestyle-investment, hotel-brand products - and to discourage listing properties valued at less than 20 million baht.

Welcome to the lottery that is the resale market. Many lone sellers who want to attract interest in their properties are searching for the right formula to stand out from the crowd. Often a sliding scale of commission is offered with benchmark selling prices attached. More recently, there has been an unsettling trend towards cash bonuses or luxury goods being offered to people within an agency who close a sale.

Current choices for individual sellers remain somewhat limited to listing properties with as many agencies as possible, placing classified ads in newspapers or putting up signs at the property.

Along with selling the unit, obtaining legal advice once a prospective buyer is on board is the next step to closing the deal. While sales and purchase agreements are not mandatory under the sales registration process at the Land Office, it is strongly advisable to create a well-drafted document covering all commercial details of the transaction. Clarity and detail are the order of the day in such agreements.

While capital gains taxes are not applied in Thailand, a transaction tax remains commercially negotiated between the buyer and the seller.

As a starting point, wise sellers need to actively involve themselves in the process from the start: getting professional quality photos of the property, doing their own research on market values of similar properties in order to price their units to sell, along with prudent listings to key agencies who specialize and cater to either their geographic location or product.

More is often not merrier and selective targeting where only one qualified buyer is needed to complete a sale is much more effective. No doubt other distribution channels will open once the agencies start to understand the depth of secondary products and sellers will benefit.

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