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Phuket’s residential real estate market benefits from being cash-based, with little mortgage debt, and largely driven by tourism.
For those looking for property for sale in Phuket, the island’s cash-based market offers long-term stability, unlike mortgage-dependent markets, where economic fluctuations and tightening credit conditions can trigger downturns.
Despite the relatively complicated structures for freehold property ownership in Phuket, the exception being freehold condominiums, the island’s real estate market has demonstrated one of the most consistent and impressive growth trajectories of any resort market worldwide. Today, Phuket is firmly established as one of Asia’s leading destinations for lifestyle property investments, with particular strength in the branded real estate sector. In this article, we explore one of the main reasons behind the robust nature of its market, the dominance of cash transactions, making Phuket a wise choice for discerning property investors.
Please note, in this article, we are focusing on residential real estate. However, in the case of commercial property in Phuket, Thai companies are able to secure mortgages, which makes this sector of the Phuket real estate market naturally highly leveraged. As a result, commercial property investments in Phuket are more susceptible to typical economic factors, such as interest rate movements and changes in lending availability.
A Market Shielded from Economic Shocks
A vast majority of property markets throughout the world leverage credit for consumer demand. This use of credit creates leverage. While this typical model allows more people to buy property, it also comes with downsides:
- Many property owners depend on mortgages.
- When borrowing is cheap and regulation is loose, investors can become overexposed.
- Economic downturns can lead to loan defaults and price drops.
- Interest rate rises reduce affordability, slowing demand.
Phuket’s cash-based market mitigates these risks:
- Foreign buyers, who drive demand and dominate the market, use cash, not credit, insulating the market from many aspects of financial crises.
- Property values tend to remain more stable and are less affected by bank lending policies.
Market Resilience Over the Years
Phuket’s real estate market has shown consistent resilience, quickly rebounding from major global crises, including:
- The 2004 Boxing Day tsunami
- The Dot-Com Bubble collapse and 9/11 attacks (2000–2001)
- The SARS outbreak (2002–2004)
- The Global Financial Crisis (2007–2008)
- The COVID-19 pandemic, with Phuket reopening through the Sandbox program in July 2021
This graph illustrates the strength of Thailand’s tourism sector, showing how tourist arrivals have consistently rebounded after major global events, with the most significant dip occurring during the pandemic.
Please note: The ability of Phuket’s market to recover quickly from the pandemic was not because it is cash-based – this was driven by the tourism sector, which rebounded rapidly. However, the fact that it is cash-based largely limited the impact of major global economic downturns, which typically have a major effect on real estate markets.
Phuket’s Cash-Based Market and Its Role in Stability
A key factor behind this resilience is the cash-based nature of the market. Since foreign buyers cannot obtain mortgages from Thai lenders, virtually all purchases, especially in the luxury sector, where foreign buyers dominate demand, are made with cash. This lack of leverage protects the market from economic shifts, such as interest rate changes and stricter lending criteria, which typically impact leveraged markets, thereby providing greater stability.
Not Just for High-Net-Worth Buyers
Phuket isn’t only for high-net-worth buyers. Low to mid-range buyers can enter the market affordably.
Entry-level investment opportunities:
- Freehold condos are available for under 3M THB, allowing many international buyers a foot on Phuket’s property ladder.
- A large percentage of freehold condominiums are sold off-plan, making it easier for buyers who don’t have as much capital upfront.
- Off plan projects are available across all property times. Payment is by instalments as investors settle in stages over the course of construction dramatically easing cash flow.
Please note: Off-plan opportunities apply to the entire market. Some of the most expensive villas on the island, commanding up to $20 million and beyond, are still sold off-plan, often built to order, allowing for customisation of high-end bespoke properties.
Freehold Condos vs. Freehold Villas: Understanding Ownership Costs
Buying a villa or house:
If it is freehold, it requires a corporate holding structure.
- This is because the freehold of a house is actually its land, specifically, the land title.
- Thai law prohibits non-nationals from registering land in their own name.
- The only way for a foreign buyer to legally acquire a freehold villa or house is through a Thai company that holds the land title.
Corporate holding structures
- Thai shareholder(s) required (minimum 51%)
- The Thai shareholders need a genuine interest in the company – they cannot just be nominees and need to be financially compensated by dividends when profits are generated.
- The company should be set up as a legitimate business to generate profits, rather than solely for holding the freehold.
- Ongoing legal and financial compliance costs – substantial, but fully compliant company holding structures for freehold villas in Phuket are still viable for more expensive properties.
Buying a freehold condominium:
- Freehold condominiums, which are distinct from leasehold apartments, have the significant benefit that foreigners can buy them and register the freehold directly in their own name.
- Freehold condominiums do not require a corporate structure.
- They have lower acquisition and running costs compared to like-for-like villas.
For low to mid-range buyers, freehold condominiums are the simplest path to freehold property ownership, as they can be registered directly in the buyer’s name without additional legal complexities.
Phuket’s Stability Over 40+ Years
Phuket’s property market has never experienced a major crash in its 40+ years of development. The island first began attracting overseas real estate investment as infrastructure improved, starting with the Sarasin Bridge in 1967, which connected Phuket to the mainland, and the launch of direct international flights in 1984. Since then, real estate prices have followed a steady upward trajectory, driven by sustained demand, tourism growth, and continued infrastructure expansion. Unlike speculative markets, Phuket’s real estate sector is cash-based, tourism-led, and free from credit dependency, which has shielded it from global financial shocks.
Dubai’s Boom and Bust Cycle
By contrast, Dubai experienced a dramatic property crash in 2008–2009, when mortgage-driven speculation sent prices soaring, only for them to crash by 50-60% when the global financial crisis hit. House prices dropped by 40% in the first quarter of 2009 alone (source: The Guardian). The heavy reliance on foreign borrowing and rapid development made the market highly volatile. While Dubai’s market has since recovered, it remains tied to global lending conditions, making it more susceptible to future downturns.
Key Takeaways
- Phuket’s real estate market is largely cash-based, shielding it from economic downturns.
- Entry-level condos are accessible for low to mid-range buyers.
- Off-plan properties allow buyers to pay in stages rather than upfront.
- Freehold condominiums can be registered directly in a foreign buyer’s name.
- Phuket’s market has remained stable for 40+ years, while mortgage-dependent markets like Dubai have experienced extreme volatility.
Phuket remains one of the world’s most attractive real estate markets – one where cash is king.
