An analysis of the situation by CB Richard Ellis has uncovered a significant drop in real estate transactions, fewer property launches and an increase in the number of projects being cancelled.
In its latest report it confirms that five years of a rising property market came to a halt in the last quarter of 2008. But Phuket is unlikely to suffer a property crisis like that seen in Spain, which also relies heavily on foreign property investors, analysts say.
'In many ways the Phuket property market is a foreign driven market located on a Thai island. The bulk of visitors, hotel guests and property buyers are all foreigners,' said David Simister, Chairman of CB Richard Ellis (Thailand).
'While the slowdown, exacerbated by the forced closures of the airports became apparent in December when the numbers of bookings, tourists and traditional buyers of Phuket property all declined sharply, we do not expect the Phuket market to follow Spain or Florida into a headlong crash, as there are fundamental strengths to Phuket which differentiate it from other global resort markets,' he explained.
Among these fundamental differences is the fact that most completed projects in Phuket have sold out almost all of their units, leaving limited supply. The CBRE report shows that, of a total of almost 3,000 villa units in completed projects, 89% have been sold out. Figures for the condominium sector are similar, where 92% of just over 2,000 units in completed projects have been sold out.
Also further growth in supply will be curtailed by project delays and cancellations, which may prove to be positive for the island in the long run, Simister added.
CBRE had estimated 1,700 condominium units would be completed in 2009, but that is now unlikely as a number of projects have been delayed due to slower take-up rates. In the villa market, its research has identified over ten projects with more than 450 units that went on hold or were delayed during the final quarter of 2008 alone. Around a quarter of all upscale hotel rooms under development are now on hold as well.
'In the long-term we remain bullish on this market, since we believe that buyers of luxury and high-end properties tend to make choices based on lifestyle and not primarily on pricing,' said Simister. 'That being said, it is unlikely that demand for these high-end properties will recover before the global economy improves,' he added.
While Phuket is not immune to the global property downturn, the luxury end of the property market has continued to do well, according to real estate experts.
