Recent research from Phuket real estate company Siam Real Estate has revealed a trend on the island for resale properties to be priced significantly lower than comparable new developments.
According to the firm, the majority of Thailand property buyers prefer to purchase new properties. There are many reasons why buyers this option is preferred over the alternative resale options. New properties, of course, have never been lived in and offer the latest in terms of building materials and quality.
Some property developers also offer extended payment terms during the construction period, with special introductory terms for buying off-plan resulting in a higher capital appreciation. Furthermore, buyers can enjoy average annual rental returns of between 5 percent and 7 percent.
Typically, according to Siam Real Estate, capital appreciation when buying during the pre-sale period is up to 30 percent, and between 5 percent and 10 percent when buying during the construction phase.
To compete with the demand for new property, sellers of resale properties are able to offer attractive price discounts and therefore, according to the firm, Phuket’s resale market is starting to offer better value.
Research from the firm has showed that resale properties are currently priced at a discount to new developments based on the more than 4,500 property listings the company offers in Phuket.
There are numerous reasons why sellers are able to offer discounts on resale property. Foreign buyers in Phuket who bought five years ago or more have seen the Thai baht appreciate strongly against their home currencies. In the case of US$, Euro and GBP, the Thai Baht has appreciated more than 20 percent during the last five years. Therefore many foreigners who decide to sell are able to do so at a much lower price than the true market value of their property. When these sellers repatriate their money they gain on the exchange rate.
During the last 10 years construction costs in Phuket, particularly materials and labour, have increased significantly. Those buyers who purchased units between five and ten years ago can offer a lower price than a comparable new development and still make an attractive capital gain.
Land prices have also increased dramatically over the last five years, and in some locations prices have doubled. This increase is adding to the cost of new developments as developers have to pay higher prices to purchase land plots. After five years of ownership property transaction tax is reduced from approximately 5.3 percent to approximately 2.5 percent on a freehold property.
As the resale market in Phuket continues to mature Siam Real Estate expects resale prices to align with the prices of new developments. When the availability of suitable green field land plots in Phuket becomes scarce, it said we will see the resale market begin to mature as demand for resale properties will increase.
Source: www.siamrealestate.com
This news article was written by Kevin Hodges, the North Branch and Investments Manager for Siam Real Estate (SRE) in Phuket and author of SRE’s Phuket Residential Market Research Report. He has more than six years’ experience in Phuket’s real estate market and provides advice and assistance to property buyers, sellers, developers and investors. [email protected]
