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Phuket Condominiums and Villas Are Shrinking in Size

March 13, 2020
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It is becoming more and more evident each day that Phuket is transforming itself from a purely vacation island during the pre-2015 period into an investment destination of choice, post-2015, especially when the number of international tourist arrivals to Phuket had exceeded 3 million. Recognizing changes in demand and customer profiles, condominiums and villas in Phuket have been adapting to meet buyers’ needs.

As growth in the tourism industry accelerates, opportunities for short-term rental of condominium units and villas have also increased. This encourages developers to adopt a different approach and transform what used to be large condominium and villas into something smaller – much like that of a standard hotel in terms of sizing and furnishing.

The majority of the Phuket future condominium supply are small studio and one-bedroom unit types priced below THB 8 million per unit. Mid-range to luxury condominium future supply are often one to two-bedroom units priced between THB 10 - 30 million. Similarly, most of the villa future supply are in the lower-end of the market priced below THB 35 million, which are also the most in demand.

To entice investors, developers have been bringing in hotel brands to increase the attractiveness of their projects and to improve their condominium and villa projects and to improve their rental management programs. These hotel brands often take a large share of rental revenue, especially if they are established.

The revenue sharing percentage of each property type can differ when calculated either by gross or net yield. Generally, rental program terms are often split 60% to 40% by net revenue between the owner and operator, respectively. An established operator may take a larger revenue share, sometimes accounting up to almost two-thirds of net revenue. This is justified by covering additional costs that are normally due on the owners’ behalf such as renovation fees which are charged approximately once every five years.

The owner-stay condition in rental programs comes in a variety of offerings. Owners usually benefit a free-stay duration of 30 to 45 days throughout the year, but some projects may go up to 60 days. The amount of owner-stay days is usually split equally between the high and the low season where the former is counted as 1 day and the latter is counted as high as 6 days.

Some condominium rental programs only allow owner-stay days during a specific period of the year, while the remaining days are considered as the blackout period. During the blackout period, owner-stay days are charged similarly to when a condominium unit owner has used up their free-stay quota.

The increase in competition between income-producing properties benefit buyers with market standards that come with a variety of choices. The island’s real estate scene will continue to evolve and potentially pass on condominium development potential to other nearby region such as Phang Nga and Krabi, where the development of new airports are likely to generate new demand for the north of Phuket and the Phang Nga region.

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