Samui property market at a turning point
Things look like they are about to bounce back
Not very long ago, Koh Samui’s property market was roaring ahead with promises of great riches for those who invested in the island. Although conditions have changed markedly over the past three years, the market has now reached a turning point and an adjustment is pending, says Yongyuth Chaipromprasert, CEO of the Aquarius Estate Company.
SUCCESS STORY: The Casavela condominium by Aquarius, now being operated as an hotel, received a good response from its initial purchasers and units are now changing hands at a premium over the original prices.
With his finger on the pulse of the island’s property market after the hugely successful development of the Casavela condominium, which his company now operates as the Shasa Hotel, Mr Yongyuth said the market peaked between 2004 to 2006 when many new projects were launched.
However, from that point on, a host of problems dragged this foreign-dominated market down, notably stricter application of laws against foreigners using local nominees to buy property and transfers of money to do so. A number of scandals related to fraudulently acquired land titles ensued, while national political instability affected the investment climate as well.
“These problems dragged on for two to three years, they didn’t just suddenly crop up,” says Mr Yongyuth.
Research by Aquarius shows that there are only 17 major ongoing projects – 10 condominiums and seven villa developments – on the island. The figure excludes some small developments, some of dubious legal standing.
“Our count shows that the condos in the 10 projects only total 380 units, while the villas in the seven projects are 111 in all,” he said.
Mr Yongyuth said sales were weak as many of the projects are just getting started and foreign buyers in any case are very cautious these days.
Mr Yongyuth plans another project similar to Casavela but says it probably will be on Phuket. However, the soonest it could be launched would be the middle of next year because the company is busy building and marketing its AeQua luxury condominium on Sukhumvit Soi 49 in Bangkok. “AeQua ties up 1.3 billion baht and we have to watch our cash flow.”
While his company is sailing smoothly, Mr Yongyuth admitted some others might not make it through the next year or so. “The reality of business is that some will fail. Even in normal circumstances some don’t succeed so why wouldn’t there be any that don’t in these circumstances?”
Even so, the tough environment does not mean developers are not working, but they are focusing more on how best to proceed. Mr Yongyuth explained that in order to ensure success these days, a developer should reduce the amount of risk he usually takes by 20% while also putting in 20% to 30% more capital. One also might have to sell at a lower price and this goes down the chain with suppliers too having to accept lower profit margins. However, all businesses are helped by the current low lending rates.
In comparing Bangkok and the resort markets, he observed that the former is up to 80% Thai with foreigners either buying units in the secondary market or in projects they develop and sell among themselves. Buyers in Samui and Phuket are mainly foreigners with Thais not having bought more than 5% of luxury condos and villas on the bigger island.
This means it is necessary to make an effort to bring foreign buyers back in order to ensure that the two islands boom once again.
Mr Yongyuth’s experience in handling both groups of buyers also shows that foreigners are a lot fussier than Thais when buying property. However this could reflect the risk of making a big purchase in alien territory and not knowing the developers, amid fears of being cheated. While this is generally the case, most foreigners do move on once the deal is done and do not make continuous demands.
Because Mr Yongyuth travels by air at least twice a month, he knows how the closure of the airports affected the mood of travellers. People started moving through the airport quickly, without any display of joviality. It was only during the four-day break last month that he again saw happy tourists taking photographs at various spots in the airport and stopping to buy sweets and magazines as they did before.
This all boils down to the difficult political situation, and as Mr Yongyuth sees it, those in charge now need to focus on how to create lasting stability and tranquility instead of short-term gamesmanship.
“There is no instance where the winner gets 100% and the loser loses 100%. Those who are winning have to consider the losers too and the losers shouldn’t be driven to lashing back,” he says. “Share and divide and give each other and don’t kill one another completely. It’s not like Chinese society where vendettas drag on for seven generations.”