Phuket holiday homes rise from the wave

[Coolhand]

From The Observer, 18th December
The Thai holiday home market is back on its feet a year after the tragedy of the 2004 tsunami.
No one can equate terrible loss of life with mere property but wealthy second-home buyers from overseas have been fundamentally important to Thailand, especially in tourist locations such as Phuket, where they bring an estimated 75 per cent of income.

Phuket escaped relatively lightly in the Tsunami, with about 300 deaths and 400 buildings destroyed. But because Phuket was the region's best-known location, and was used as a base for BBC and CNN reports, it became synonymous with the big wave in the eyes of the world.

Its income suffered. Hotel occupancy dropped 90 per cent in January and is still 20 per cent down a year later. Air traffic has dropped by a third, and thousands of property viewings were cancelled this year.

The property market is responding with a 'Phuket is Back' marketing campaign and leading developers have toured Europe this winter to show potential buyers what they have been missing. 'Sales have picked up again, although the first six months of 2005 were a wipe-out, which is a terrible blow to people locally,' says James Batt of Laguna Phuket, a complex of five resort hotels and 400 private houses and flats on 600 acres of the beautiful west coast. Forty of his rooms were wrecked when the tsunami hit.

About half of Phuket's mid- to upper-end second homes - those priced at £200,000 or more - are typically bought by Hong Kong, Chinese and British buyers. Mainland Europeans, Australians and Americans make up the rest.

An indication that the industry is returning to normal has come from German estate agent Engel & Volkers, an established name in Spanish holiday homes, which opened a Phuket office in early December.

'We made our decision before the tsunami and it didn't change our mind. We reckon this is one of the biggest-growth second-home markets in the world. In recent years, Britons have been at the forefront of that growth,' says Martin Philips, Engel & Volkers' Asia director.

But like all property markets, especially in relatively unregulated areas such as Thailand, buyers must be diligent. In August 2004 only 12 per cent of Phuket's homes for sale were flats, but now the figure is 26 per cent, says Steve O'Brien of Knight Frank, a British agency which has long had a presence in Phuket. The firm claims the sector is being swamped by low-cost, low-quality developers who have not always settled land ownership disputes before building, which can lead to resale problems for owners.

Although there are clearly bargains to be had, O'Brien urges caution. Buyers should use known agents, ideally those with British offices as well as Thai ones. They should also choose developers who offer rental management or extra amenities, ideally linked to a good-quality hotel resort. 'If a Briton buys but doesn't have good management of the property when he flies home, he's throwing away money,' he claims.

The Thai government is banning new construction within 200 metres of Phuket's high-water mark - although plenty of existing homes are much closer.

There is also a ban on building 80 metres or more above sea-level, while schemes of 90 homes or more must undertake rigorous 'environmental impact studies' before getting planning consent to deter Spanish-style overdevelopment.

A visit to Phuket today reveals surprisingly little damage. The job now is to convince potential buyers that they are safe to return.

Thai tips

After finding your ideal property, hire an independent solicitor experienced in Thai property deals, who speaks Thai and English. He will handle land registry, local authority and planning checks of the property's history. Only then pay a deposit of up to 15 per cent and enter into a purchase contract, again handled by the solicitor.

Buyers normally pay 0.5 per cent of purchase price as stamp duty and 0.01 per cent in transfer tax; they pay another 0.11 per cent if selling again within five years.

http://observer.guardian.co.uk/cash/...669693,00.html