Koh Samui Luxury Property Market
Koh Samui, September 08, 2008:
Despite concerns over a global economic slowdown, professionals in Koh Samui property still see plenty of reason to push forward with residential development, especially at the high end of the market. A diverse client base, coupled with a growing international reputation and strong brand investment look set to help Samui weather yet another potentially damaging storm. Jules Kay investigates.
The worldwide credit squeeze and the dramatic fall in US and UK house prices have prompted much talk of a global recession of late. As a result, transaction volumes have been lower than expected on Koh Samui as investors hold off on purchase decisions until the market offers more certainty. Other resort destinations like Pattaya and Hua Hin continue to attract significant numbers of Thai property investors and although there has been an increase in Thai investment on Koh Samui, particularly in the resort sector, demand for residential properties remains highly dependent on foreign buyers, meaning the market is particularly susceptible to global concerns.
Foreign buyers at the medium to low end of the market, especially those from countries that have historically favoured Thailand, are now questioning the feasibility of second home investments in the context of rising inflation and less easy access to finance. The threat of recession and consequent job losses has many salaried professionals opting to save their cash rather than spend it.
On Samui, the above-mentioned uncertainties have clearly had a profound effect. But at the same time, many developers on the island are operating with the benefit of hindsight, having already experienced the market slowdown that followed Thailand's year of military rule. These firms are sufficiently funded to ride out the low season months and have learned to adapt to the market and offer solutions that suit the needs of those clients still keen to invest in resort properties. As a result, construction continues island wide and new projects are launched on a regular basis, some of them surprisingly large in terms of both their scope and level of investment.
The period of consolidation during the months leading up to last year's election transformed Samui's international image, with larger, global companies seeing the island's potential as a competitor in the same league as Phuket. Ease of access, developer friendly topology and a fast-growing choice of natural assets and commercial attractions quickly pushed Samui up the list of desirable residential destinations. When well known branded resort chains added their seal of approval by announcing mixed use projects on the island, the market's future began to look brighter than it had ever been.
Thailand's residential resort market has always followed the whims and successes of the tourism industry. Sales of resort properties are often re-enforced by high visitor numbers and prices driven up by the arrival of high end resorts and their high net worth guests. On Samui, visitor numbers rose from 600,000 in 2000 to around 1.5 million in 2007, but perhaps even more significantly, the type of visitor switched from budget to mid-range and increasingly high-end travellers. The benefits of this change included a wider client base and a more diverse range of developments that began to attract greater worldwide interest.
In the current uncertain economic climate, Samui-based property professionals say two distinct markets are experiencing high levels of interest and activity. According to Rodney Waller from Lynx Properties, the luxury end of the market, with properties priced over Bt30m continues to attract high net worth buyers. "These clients tend to be less price-sensitive", he said in a recent article. "Conversely, at the low-end of the market, where property is typically priced under Bt9m, property is also moving, especially where mortgage financing is available for non-Thai residents".
In addition to these private buyers, Waller claims that shrewd private and institutional investors are also acquiring land and property on Samui that in 3-5 years time will be considered a real bargain. Improvements to the airport, with increased flights and the introduction of new airlines and routes, along with higher quality construction and improved infrastructure, all suggest Samui is working towards a more sophisticated living environment.
Similarly, in terms of its client base, Koh Samui's profile has never been so high-end. The big brand investments now include Conrad, W Hotels, Banyan Tree, Hyatt and Dusit. These global players clearly believe the island is ripe for expansion, and perhaps more importantly, such brands have the influence and finances to actually impact on Samui's long-term future. Minor Group's The Estates Samui, a project comprising 14 ultra-luxury villas linked to the Four Seasons Hotel, is a prime example of how high-end brands can add cachet to a destination and help to raise its profile both domestically and internationally. The award winning Dhevatara Cove and Dhevatara Residence projects further demonstrate how developments on Samui are gaining in profile. These luxurious estate developments in Lipa Noi and Bophut have won multiple international awards, setting the standard for future residential projects on the island.
Independent developers on the island are finding they now have to offer the same level of luxury and sophistication as their more established counterparts. Developments such as Chaweng Sila, a collection of 3 and 4 bedroom villas situated on a hillside overlooking the famous Chaweng Beach, boast individual infinity pools, close attention to architecture, design and landscaping, as well as impressive amenities such as fitness centres, spas and gourmet restaurants. Samui-based developer Vertuz is building an ambitious luxury resort in an enclosed private domain, offering 28 apartments and 6 penthouses with facilities to rival those of any luxury branded hotel. And Napa, being marketed by Indigo Real Estate, is stretching the upper limit in terms of prices with ocean view exclusive villas perched above Cheong Mon Beach on the island's north coast selling for Bt61m.
It is not just hotel brands and developers that have woken up to the potential of the Samui market; leading international real estate agencies such as CBRE and Engel & Volkers have recently established a presence on the island. CBRE's Samui office opened in 2007 in response to growing investor demand and the emergence of new quality developments on the island. "It is clear that Samui is an upward moving market", said Ms. Prakaipeth Meechoosarn, manager of CBRE's Samui office. "Although 50 percent of the villa developments in Samui are in the US$1m and below bracket, we are seeing an emerging market for top-end villas which achieve prices in excess of US$2m". In July this year Engel & Volkers announced their entry into the Samui market, signing a license agreement with local agency Karala. Savills, another leading property services company, doesn't yet have an office on Samui, but the company is already marketing a number of the island's high-end projects such as Baan Chlay and Aqualina.
In addition to the arrival of the industry's big players, local agencies have themselves become highly sophisticated. Kalara International Properties is already a well established name on the island. In existence on Samui since 1998, Kalara's wealth of local knowledge and experience has helped the company branch out into developing its own properties as well as continuing to provide sales and rental services.
Despite all the positives, caution and common sense remain the buzzwords when it comes to the Samui market. What happens in the next two to three years is crucial to the island's long-term success both as a tourist mecca and as a residential destination. Having raised an international eyebrow, maintaining the island's appeal is now integral to many developers strategies and with foreign ownership issues yet to be clarified in Thailand, reputation is everything. The days of the small, off-plan development are numbered as larger firms with deeper pockets and solid foundations move in to stake their claim. The island must also face up to growing competition from neighbouring Koh Phangan, even at the higher end of the market. Developments such as Sitara Village, a stylish, eco-sensitive project near the renowned Thong Nai Pan beach, are a sign that Phangan too can attract a sophisticated, affluent clientele.
Phuket's speedy post-tsunami recovery was largely achieved through the strategic marketing of hotels and developments combined with price reductions, special offers on flights and realistic pricing for land and houses on the island. But with the cost of construction rising by as much as 20 percent year on year due to increased transport costs and demand for raw materials, competing on price may not be the ideal solution for Samui.
The cost of importing goods has made Samui a much more expensive place to live when compared with other parts of the Kingdom. In order to distinguish itself from its big sister, many property experts believe the best market to tap into on Samui is at the luxury end of the scale. Beachside and ocean view properties are relatively hard to find in competitor destinations. This has allowed Samui to lead the field in luxury villa sales. In fact, developers often achieve higher prices for properties than on Phuket as Samui is increasingly attracting high-end travellers prepared to pay a significant premium for privacy, personal service and real luxury.
However, in addition to exclusive private villa developments, Samui's success as a tourist destination inevitably means condominium properties are now firmly on the development schedule for the island. Several large scale beach club concepts are already under construction, specifically designed to tap into the tourist market, providing resort style facilities within a residential environment. In line with the island's villa projects, these resort developments also have their eye on the upper end of the tourism market. Due to open in August 2009, the Absolute David Lloyd Marina Resort on Tong Krut Beach is one such example. The 75 luxury suites will allow owners access to resort facilities such as top-range sports equipment and the use of a private speedboat. Sithoranee Property's The Sea Koh Samui, another luxury beachfront development, will offer 15 condominium units as well as 6 boutique villas, tastefully designed with minimalist forms and oriental touches. Much larger in scale is the Himmapan Beach Samui Resort and Spa, dubbed "Thailand's first purpose-built destination resort", the project is marketed as a "buy-to-let hotel investment" and promises a massive 14 percent yield for early buyers.
Another aspect of the market that is becoming increasingly significant is an approach to environmental sensitivity. Many of the newer developments, whether villas or condos, feature eco-friendly designs and include attempts to re-use and recycle waste and water, as well as to reduce energy consumption. A number of Thai and international firms on Samui recently signed an MOU to show support for a government-backed Green Island project. This was designed by concerned Samui residents to ensure that the island's natural assets are protected during the next phases of development. Furthermore, the island's largest villa rental agency, Samui Villas and Homes launched a C02 offset programme, persuading owners to add environmentally friendly features and systems to their properties, while also offering their guests the chance to offset pollution caused by their travel to, from and around the island.
With new developments coming online, infrastructure programmes scheduled and green projects receiving backing locally and from officials in Bangkok, Samui is poised to evolve once more into an altogether more established destination. The next generation of projects offer a diversity that will appeal to both tourists and potential residents, not only from Asia Pacific, but from all around the globe.
Article courtesy of Asia Property Report
