Phuket's Real Estate Market: Insights and Forecast

Economic and Infrastructure Advances Spur Phuket's Real Estate Recovery

Having received a big shot in the arm from infrastructure development and appealing investment in the future, Thailand is envisaged to become the fastest-growing economy in the region. According to the forecast of the National Economic and Social Development Council that predicts the country's gross domestic product growth to hover between 3.0% and 4.0% in  2024. The public infrastructure development together with pulldown of the old one will fundamentally recreate the nation's landscape is one of the things. A standout example is the much-anticipated high-speed rail link connecting Bangkok’s three airports, a project that is said to bring about regional connectivity as well as drive demand for new residential properties especially in Phuket, a place that is already very popular with tourists.

Tourism on the Rebound

Phuket's economy, massively dependent on the tourism industry, is anticipated to recover from the dismal two years of the pandemic outlook to the pre-pandemic level by 2025. With the Thai government focusing on 40 million tourists that have a direct hit on tourism, this tropical paradise cannot be overlooked by these tourists seeking vacation rentals or investment Chinese, Hong Kongens, and Russians,. The luxury market is still being driven by China, Hong Kong, and Russia investors with the shift to high-value property becoming the new norm.

Market Dynamics and Supply Trends

The Phuket real estate market is increasingly marked by a rising demand for high-rise property. Large numbers of foreign investors tend to purchase whole floors, if not entire buildings in new developments, particularly at the higher end of the market. Competition is tough, though Phuket's property market benefits from relatively inexpensive land compared with Bangkok and a very attractive location for residential and investment purposes.

In Phuket, new housing supply will increase by 6.5% annually between 2024 and 2025, adding around 19,000-23,000 units each year. While such a rate of increase is quite substantial, it still represents less than the pre-pandemic annual average supply of 36,000 units. This rise in supply is likely to be matched by an annual 4.0% increase in sales to approximately 33,000 units per annum.

Challenges and Market Adjustments

Despite the positive outlook, there are a number of challenges that may temper the growth in this market. High levels of household debt consistently raise the lending conditions, hence tightening property sales. Furthermore, an average annual increase in the prices of new houses by 5-10%, propelled by increased energy costs, construction material prices, and labor shortages, may make the potential buyers shy away. Complicating the investment landscape even further recently has been the reintroduction of the Bank of Thailand's loan-to-value, or LTV, rules along with the current cycle of interest rate hikes.

Prospect for the Future

Government policies promoting sales will likely continue to support the real estate market in Phuket in the near future. A cut in fees related to the transfer of ownership and mortgage registration, that is effective since January 1, 2023, should stimulate further market activity. The promotion of Thailand as a 'second home' for high-net-worth residents will also be certain to drive in more foreign investors.

To put it in a nutshell, Phuket's real estate market is on the path to recovery, with all its dimensions of economic growth, infrastructure development, and the resurgence of tourism. Of course, other issues are still disruptive, like the high household debt-to-income ratio of Thais and rising construction costs. However, all these factors together make it appealing to both domestic and international buyers, underpinning a very strong market outlook. Accordingly, investors and homebuyers look at a bright property future in the years to come.