Rental prices in Phuket have risen sharply in recent years, providing owners with an attractive return on investment. The recent strength in the rental market has coincided with an increase in the number of tourists, resulting in demand for rental properties exceeding supply. Quality rental properties have become scarce as tenants are either renewing their leases or signing long-term leases, sometimes for terms of three years or more. This has made it more difficult to find quality rental properties on the island.
(House price trends in Phuket Island, Thailand)
From the ‘Siam Real Estate Residential Market Research Report 2014’, we found that the average rental return for a Phuket property is 5%, rental returns range from 3% to 9% in certain cases. Long-term rental prices in Phuket range from an average of 22,000 baht per month for a two-bedroom apartment, whereas the average price is over 200,000 baht for a four-bedroom villa.
Many property developers in Phuket are now guaranteeing rental returns to buyers of properties. There are many offers that range from 4% net to 9% gross, depending on the time frame, from 2 to 15 years. If buyers accept such offers, they would be wise to check the bylaws carefully, as many of them offer very high returns, but in reality the net gain is much lower. The realtor you appoint can review these bylaws and provide you with a breakdown of gross receipts minus costs.
The rental market in Phuket is very diverse and the demographics have been changing over the past decade. Many people of different nationalities come to Phuket for holidays and long-term rentals, so the rental market is affected by the changes in the global economy.
During the 2008-09 period, the global financial crisis reduced the number of Europeans and Americans coming to Thailand. These visitors were quickly replaced by an increase in tourists from Russia, who seemed to have an endless supply of money, but due to Russia's recent financial crisis, the number of tourists coming to Phuket has decreased. However, the Russians' liking for Phuket is unlikely to wane, and once the Russian economy recovers, we expect this rental market to recover.
We are currently seeing a trend of more and more Southeast Asian foreigners moving their families to Phuket, thanks to the island's improving infrastructure, first-class international education and good facilities. These foreigners tend to be based in Phuket and then commute to work across the whole of South East Asia, due to the Phuket International airport, commuting to and from Phuket is very easy. The rental market in Phuket will change again as the number of Asian tourists increases, as they have different needs. Family tenants want to rent close to the island's international schools and Asian tourists prefer to be close to the amenities, restaurants, shopping and other leisure activities, they are more accustomed to staying inland.
This will drive up demand for inland rental properties, pushing up prices in central, northern and eastern Phuket. Phuket's future economic development is bright. Phuket International Airport has seen very strong growth in arrivals and is currently dealing with the airport expansion, arrivals are expected to continue to grow, clearly demonstrating Phuket's status as a Southeast Asian travel destination. Phuket is investing heavily in its infrastructure and tourism sectors, and the government and private sector are increasing spending to drive investment. All of this bodes well for the bright future of Phuket, the paradise island.
Siam Thailand property CEO Richard Lusted’s column
Any questions feel free to drop an email at email@example.com.
This is an exclusive article by Juwai.com.
This article is contributed by Juwai Columnist, Richard Lusted.