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Last Updated: Sep 14th, 2008 - 02:45:41 |
Mention Phuket and the first word that comes to most people’s minds is ‘tsunami’. The events of December 26, 2004 are still fresh in the thoughts of many around the world, and rightfully so; over 200,000 died in the Indian Ocean countries hit by the tsunami.
Today, one year on, Thailand’s ‘crown jewel’ is looking to the future, and the scenario looks good. Recently Laguna Phuket launched the ‘Phuket is Back’ campaign, but in truth it was never gone. Only a minimal percentage of properties were ever damaged and the infrastructure of the island proved that even under such demands the roads, electricity, water and hospitals could all operate under pressure.
Beachfronts and businesses have been re-built, land prices continue increasing at pre-tsunami levels, developments have carried on with construction and people are continuing to buy property. Setbacks in the tourism industry did not have any noticeable impact on the property market. If anything it gave businesses the opportunity to re-organise and plan their future growth.
While tourism has been the key driving industry in Phuket for many years, the last 12 months have revealed that it is not as strongly correlated with the property market as one might think. Despite last high season being decimated by the tsunami and damning media coverage that followed soon after, the property market on the island has stayed strong. Desmond Hughes, partner of Belmont Limcharoen legal firm, accounts for the state of the property market: “Agents and developers will mostly confirm, the property market picked up very quickly and I believe that this is due to the fact that tourist numbers do not necessarily equate to the type of serious buyers investing in real estate although 'tourists' can quickly convert into serious buyers after a few visits to the island.”
Despite the entry of several other high profile legal firms in Phuket Belmont Limcharoen has remained busy. They have retained their client base as well as built on it, which emphasises what many in Phuket already know - that business on the island remains buoyant.
A good example of this is Island Furniture, run by Alan Cooke, British Consul. They sell furniture to a broad spectrum of customers, ranging from individual sales to supplying entire developments. The last 12 months have been the company’s most successful. Cooke explains: “Our offices never closed. The tsunami had zero effect on the business. We have had an extremely good year; in fact we have had a significant increase on last year’s sales. Even in the weeks after Boxing Day the impact on sales was minute. We have actually had to increase the size of our showroom this year. I continue to be optimistic about future growth in the property market.”
In a media release titled ‘Phuket: The Future’, CB Richard Ellis (Thailand) Co, Ltd gave an overview of the residential property market on Phuket post-tsunami. In the article it was explained that although the tourist industry suffered directly from the tsunami, the property industry fared much better with all active residential projects closing sales without giving discounting of any kind. CBRE chairman David Simister says there were several reasons for this: “We believe the reason customers are actively proceeding with acquisition is that they believe that the Phuket’s residential property market is in the early stages of a long term growth curve.”
They also believe developments indicate that in the future Phuket will contain a much more varied offering of property with the market going up in terms of volume of sales, range and sophistication of facilities offered. CB Richard Ellis’s business in Phuket remained increasingly active throughout 2005. Since December 2004, they multiplied their number of permanent full time staff by 7.5 times and are continuing to recruit at the rate of several people per month.
It is fair to say that the property market has matured from that of a hotel and tourism driven market to one that is largely fuelled by those who want to maintain a long-term property on the island. Retirees and people who have benefited from property booms in Europe and America have become one of the largest market segments. By having customers who think long-term it is possible to avoid the negatives so associated with the changing trends of tourism as well as short-term factors.
Most developers on the island will highlight one major factor when talking about property in Phuket: the limited amount of land. The west and south coasts of the island are relatively well developed, especially the beachfronts. This means new developers have had to increasingly go inland to find suitable sites. Attention has progressively turned to hillside sites with sea views. Even with demand staying constant there is simply not enough land to maintain supply thus creating ongoing increases in land value. Even the catastrophic events of Boxing Day have not been able to damage, or even slow, land value appreciation.
Phuket One Real Estate is one of Phuket’s largest real estate agents. Their Kalim office was badly damaged by the waves but business gradually returned back to normal with levels of sales and customer interest reaching pre-tsunami levels by October. When asked about the tsunami’s impact on land values, Larry Cunningham, managing director of Phuket One, explained, “If anything it has helped increase it in value. The publicity afforded Phuket post-tsunami told the world what we already know; that Phuket is a beautiful island, Phuket is part of Thailand and the Thai people are very kind hearted. Prices have increased across the island; there has been no decrease at all. Some areas have seen prices rise by as much as 20 per cent.”
Ian Mitchell of Paradise Heights agreed that the tsunami offered a silver lining of interest generating publicity and shared his experience on land on the island post-tsunami: “Land values continue to rise, a little too rapidly for my liking. Good quality land will always increase, beachfront and hillside sea view sites continue to be in great demand, and luckily we have both covering nearly 600 Rai. Land values on Cape Yamoo have increased 30 per cent this year for the good quality land.”
Increasing levels of sales and enquiries at Paradise Heights & Paradise Bay Marina Resort have stood as a strong testament to the demand for high quality properties on the island as well as showcasing the rapidly rising star of Marina developments.
In July 2003 a decision was made that was to heavily influence the property market of Phuket. A review was ordered on import taxes for yachts in Thailand and a decision was made to implement a zero tax system as well as overhauling previous marine regulations which were effectively strangling the Thai marine industry. The overhaul of these laws combined with the increasing highlights of such events as the King’s Cup Regatta, the Phang Nga Regatta, Phuket Race Week and PIMEX meant that marine developments were soon being planned to meet with rising demand.
Royal Phuket Marina is a good example of the marine industry before, during and after the Boxing Day disaster. It is the brainchild of Gulu Lalvani and is a 190 rai, Bt6 billion project. They had only just begun to sell their properties at the time of the tsunami and despite being on the east coast of the island and having absolutely no damage done to the marina, sales that had been going through the roof quickly levelled out. They have now picked up again and much of the initial drop in demand was attributed to the fact that the majority of the prime condos on the marina frontage had already been sold by the beginning of January. Overall Royal Phuket Marina has remained positive about the events of the last year.
Jeanette Skelton of Royal Phuket Marina elaborated, saying, “The tsunami, even though it was a negative, has also been a huge marketing campaign for Phuket. There is not one person in the world that does not know where Phuket is. Everyone has seen the stunning beaches and water and are now coming to see it for themselves. We are getting more and more boat owners from around the world who are moving their boats to Phuket as the fuel, crew and maintenance costs are far cheaper then other areas around the world.”
The list of marinas in Phuket is seemingly growing by the day. There is Boat Lagoon, Ao Por, Layan Marina, Royal Phuket Marina, Paradise Bay Marina as well as plans for the Government sponsored Chalong Marina. By fusing together the appeal of marina facilities with high quality property development it is possible to create excellent selling points for property that will fund the long term construction costs of the development. In this way property and marinas both feed and fuel the growth of each other.
As mentioned above, tourists often turn into residents, after deciding they want to invest in property in Phuket. In reference to the island’s tourism industry, there are two figures that stand out. The first is that 98 per cent of hotels remained operational and fully functioning after the tsunami and the second is the 14,500 jobs that were lost on the island as a direct result of the media’s inaccurate reporting. Despite the available hotel rooms and fully working infrastructure the tourists stayed away in large numbers. Phuket International Airport recorded only 159,423 tourist arrivals between January and May, compared with 487,419 in the same period the previous year.
But that was then. Through word of mouth and the efforts of long-term residents of Phuket the world has slowly realised that the island is fully operational and has not lost any of its appeal. Hotel operators are optimistic about the upcoming high season. Laguna Phuket Resort is expected to be at full capacity throughout December and have a minimum of 75 per cent capacity during January. Holiday Inn Phuket, which has just re-opened, is 70 to 80 per cent booked for the next four months. Predictions on the total number of tourists visiting over the next 12 months vary, but the 2.5 million mark has been widely discussed by public officials including the Tourism Authority of Thailand. This would equal records set by previous years.
As for the future, land value is expected to continue its long-term appreciation, property development is entering a stage where competition drives the quality and design of projects and it is fair to say that the fusion between property and marina development will become one of Phuket’s most exciting prospects.
The media wave
Blanket coverage by the media led many to conclude that the island was destroyed. Government warnings were issued from many western countries, despite the fact that the information they were using was grossly inaccurate. The effect on tourism was obvious to see. British Consul Alan Cooke was very clear in his views: “The media destroyed the island, not the tsunami. The waves only destroyed beachfront properties. The media based themselves in Phuket because it was comfortable. They had nice hotels to stay in, reliable phones, electricity and water. They took advantage of Phuket.”
The number of dead in Phuket varies from 700 to 2,000. No one will ever really know for sure but what most people will agree on is that out of all the places affected by the wave Phuket was one of the least damaged, indeed there other areas in Thailand, like Khao Lak and Phi-Phi, which were hit far worse.
The key holiday areas on the island were the ones that were most damaged. In Kamala the wave came 800 metres inland, in Bang Tao 500 metres. It was in Patong where most damage was caused. It was not because the wave was larger or that it came any further inland but because it is one of the most populous beachfront areas on the island. The wave reached barely 200 metres inland but it hit some of the most economically dense parts of the island. It is the key entertainment district of Phuket and the bulk of the hotels and businesses there are beachfront based.
There was a lot of visible damage but in contrast the vast majority of the island’s beaches remained untouched. Karon, Kata, Nai Yang, Rawai and Chalong Bay all received only minimal damage. The waves did not destroy the island’s infrastructure. The water and electrical supplies were not annihilated. The major constraints on mobile and landline phones were from people calling relatives and friends and not from the tsunami. And because the island’s infrastructure remained intact, Phuket became the staging point for the media’s tsunami coverage. To many people around the world Phuket epitomised the tsunami. Indeed the ruined buildings and bursting morgues were newsworthy but not any less than what had happened in Indonesia and Sri Lanka. But these were places that were not accessible and could not accommodate the needs of the media. There was no electricity there, no food supply and no hotel rooms. And so the focus stayed on Phuket. Thailand was familiar to many and Phuket had long become the holiday face of the nation.
http://www.property-report.com/archives/january06/news_one_year_on_phuket_shines_again.html
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