Challenging Times Ahead for Samui's Luxury Property Market

Global and domestic crises are worsening and moving through the first quarter of 2009 the market outlook forecasts an extremely challenging property market in Samui and other key resort areas in Thailand, according to C9 Hotelworks latest Samui Luxury Villa Market Report.

"The evolving tourism sectors and broadening access to Samui introduce a new set of potential investors to the islands real estate market, and with changes to how the island is governed it may well alleviate concerns about necessary infrastructure development and other local issues," said Bill Barnett, Managing Director of C9 Hotelworks.

Thailand is still suffering from the recent political events and a national agenda which focused more on domestic affairs whilst other regional economies were gearing up to address the impact of a global downturn. As a positive - for some markets - the Thai baht depreciated approximately 15% over the past 12 months versus some major currencies and is forecasted to devalue another 5% in 2009, thus creating lower acquisition prices for certain offshore buyers.

The Thai luxury property market is operating at a severe handicap versus more developed markets, due to the fact that in a segment dominated by overseas investors there have been no significant government stimulus packages or reforms addressing foreign ownership of land and availability of mortgages to foreigners.

Bill Barnett added, "With the increase of luxury branded developments entering the market, Samui's reputation as a luxury destination has been cemented. However, with the capital markets crunched and available debt declining, the development pipeline looks to remain static into 2010; which long term will swing supply demand into a more favorable ratio, but short term will put existing retail pricing at risk."

The Samui luxury property segment, however, continues to see transactions even though at reduced levels with buyers minimising development risk by preferring existing product to off plan units. As the economic crises continues to deepen the gap between expectations on price are becoming more evident, though property values are holding due to limited leveraging by investors.

Challenging times lie ahead for investors, developers and the government as infrastructure and development will need to grow in parallel to secure Samui's position on the luxury resort destination map.

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