Villa Rental Market Surges Despite Downturn

The Phuket alternative accommodation market of villas, condominiums and apartments is starting to reach a greater critical mass and becoming a competitor to established hotels. During this high season agents such as PIPS (Phuket Villa Rentals), Knight Frank, Shibumi, Phuket Marbella, Phuket.net, Phuket Villas and Homes and a number of other agents are reporting strong sustained demand for product.

Given the vast developments in internet booking engines the lions share of these bookings are coming online at a time when travelers are already to accustomed to purchasing other related items like airline tickets through web site and the LCC (low cost airline carrier) boom. When speaking to a number of global accommodation providers based in Asia we understand a number are already looking to either introduce new sites for this type of product or offer a category aimed directly at alternative products.

There remain some important statutory issues unresolved as much as many villa and condo projects cannot obtain hotels licenses since the Thai Hotel Act does not address these new hybrid models. Additionally at stake is taxation such as VAT, municipal rental tax and personal income tax for individual owners. A similar situation occurred a few years ago in Bangkok with the explosion of serviced apartments and the Hotel Act was broadened to cover these developments.

As a byproduct of the holiday residential property boom there remains a huge pipeline that will see sustained product come online over the next 2-3 years and as such look for the rental market to becoming a major segment in the property industry. It is yet to be seen how the hotel groups are going to come to grasps with this type of competition and is an interesting developing storyline.

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Its a shame that once again Thailand has pressed the self distruction buttom. The only good news is that the Governement has handled things better than in the past. We can only hope that we now have a sustained period of stability for the next 12-18 months. Having spent Songkran in Phuket and returned to Singapore on Monday it was amazing how the press on all channels sensationalized the disturbances in Bangkok and Pattaya which were very localsied. I think the whole country is just looking for some normalcy and peace and quite. The tourism industry and the local person on the street just needs things to get back to normal. As my wife said to me the other day - to the outside world Thailand no longer seems to be the land of smiles!

Harvey Davis, 15 Apr 2009 | 1:52 pm

I wish I could agree with your comments. However seeing the BBC footage where the red shirts attacked the Prime Ministers car thinking he was inside it and with clear footage of the police and military just standing by, I really don’t think those of us with young families would rush to the travel agents or to Google and book a flight to Thailand or rent a villa. The question we must have to ask is.. if the authorities in Thailand can not protect foreign leaders or even their own Prime Minister, how can they protect my family ?

Bill Barnett responds:
Certainly the situation in Bangkok has created a substantial amount of concern for both Thai's and foreign residents as well, we can only hope for a peaceful solution in the coming days and think its important to recognize the Thailand and the vast majority of the population are peace loving and that unfortunately the views of a minority are overshadowing those of the larger majority.

Mary Fielding, 12 Apr 2009 | 7:11 pm

the firms you quoted are not really villa players in the Phuket market, it would be interested to hear CBRE's take on this

Bill Barnett responds:
Appreciate the feedback. The posting was based on recent market research during the past 6 months and concentrated on the villa rental market and primarily holiday or short term rentals. CBRE currently does not engage in this market nor do short term rentals. About 2 years ago they entered into a specific venture on MyAsianVilla.com which later they stopped promoting due to their tax advisors informing them of possible tax liabilities on rentals and since that time have not entered the marketplace.
The firms all mentioned control a significant amount of inventory on the island including high end product in Bangtao/Surin, Kamala, Natai and Kata. Phuket Villas and Homes is an offshoot of Samui's largest agency Samui Villas and Homes. PIP's with their Phuket Villa Rentals consistently ranks among the leading rental sites in Phuket on Google and acts as a subagent for a number of other agents and is generally acknowledged to have the largerst turnover of villa rentals on the island. Both Knight Frank and Phuket Marbella are seeing increased market shares. The agents metioned based on high season numbers control produced over 60% of the villa rental market so in my opinion they are the leading firms. CBRE remains a key player and David Simister is a highly respected authority on the market so you might want to contact him on any questions you have, as he is well versed on Phuket real estate.

Simon Berry, 12 Apr 2009 | 11:27 am

how would the incident of what happened in Pattaya help Thailand and the Tourism sector ?

Bill Barnett responds:
It certainly is not helpful, as an understatement but I guess in a year of bad news, this just is a multiplier. It will certainy have a short term impact but at least it did not hit high season. We'd certainly hope that the country is able to focus on the impact of the global economic situation instead of burying its head in domestic affairs but this looks to be developing story. Phuket with its direct air access and location is somewhat insulated but big picture its certainly not a positive.

Lose Lips, 12 Apr 2009 | 7:24 am