Luxury real estate on Thailand's biggest island is making a post-pandemic rebound, but it has changed in 3 major ways

• Villa sales in Phuket cratered during the pandemic, with sales dropping by 50%.
• But luxury real estate on the island is making a rebound as Thailand opens up to international travelers.

In the past decade, Phuket — Thailand's beach-paradise island — has become a breeding grounds for villas. The island sits off the southwestern coast of Thailand and had, before the pandemic, attracted millions of international tourists every year.

The island's villa supply has more than quadrupled in the past decade, from roughly 1,000 to 4,000 homes, per real-estate consultancy Knight Frank's 2020 villa report. They've primarily served as holiday homes, but also as reliable investment purchases, with prices on the island on a steady upward trend.

On a trip to Phuket in late March, I spent three nights in Cherngtalay, on the west coast of the island. It's been leading the building boom, accounting for more than 70% of the villas built in 2020. The quiet, upscale area is about 30 minutes south of the international airport and 30 minutes north of the madness of party scene Patong Beach. In town, I found Porto de Phuket, a big, open-air mall full of beach-shack eateries and boutiques selling flowing clothing. There was a mix of languages in the air (Thai and English, Russian and French) and a mind-boggling quantity of real-estate shops to be found.

Yui Nimpinij, a sales manager at global real-estate consultancy Knight Frank, has been living and working in Phuket for more than seven years. She painted a bleak picture of the pandemic scene. "2020 was flat," Nimpinij said. "It was still not good at the beginning of 2021 because waves of Covid were hitting all over the world."

In normal years, Nimpinij said, Knight Frank sells 400 to 500 villas in a year on Phuket. At the peak of the pandemic, sales dropped by 50%.

But, in the third and fourth quarters 2021, she said, things started to turn around. Thailand relaxed border measures for international travelers in November, which affected hospitality and real-estate industries alike.

"We were quite busy with foreign buyers because we opened up the country," Nimpinij said.

Rising demand in the upper end of the market

Just down the street from Knight Frank's office is Sea Property Group. Its owner and CEO, Norbert Witthinrich, has been in real-estate sales on the island for 25 years.

Phuket was a buyers market until 2020, Witthinrich said. "Now," he went on, "in the luxury sector, it's shifting to a seller's market. You don't need to drop the pricing." That's particularly true in the $2 million-and-up sector. Before the pandemic, the biggest demand Witthinrich saw was in the $100,000 to $500,000 price range.

"At the moment what I'm seeing from our client base here is that everyone coming in is very wealthy. They're buying between $2 and $10 million," he said. "The smaller markets, $300,000 to $500,000, it's not there anymore."

Stuart Reading, the managing director of Banyan Tree Group's property division, described the market on Phuket as an inversion of the pre-pandemic trend.

"What we're seeing is an inverse of what we saw pre-pandemic, when that affordable entry-level segment was the most dominant," Reading said. "Now it's the midscale and the upscale luxury segments that are doing well."

The change comes down to the arrival of a different type of buyer. "They're buying homes as second homes, so they're not as price sensitive," he said.

Knight Frank findings show a similar trend: In 2020, the best-selling villas were priced at $600,000 or less, per the company's 2020 market overview. That segment, Nimpinij said, is all but gone. "Buyers are looking for a good deal, a bargain deal — cuts of 30% or and more," she said.

"The good deals are almost sold out. They're becoming more challenging to find," Nimpinij added.

More interest from Hong Kong buyers

Against the backdrop of ongoing political unrest and stringent Covid lockdowns in Hong Kong, the city-state is seeing an exodus of residents and expats alike. Some of that has been to Phuket's gain.

Nimpinij said she's fielded multiple requests from Hong Kong buyers, at least one of whom has bought a Phuket house sight unseen. Witthinrich pointed to a rise in demand from Hong Kong expats and Hong Kong Chinesse, the latter of which is a new market for Phuket. "You can see clearly a crest of demand for upmarket, sea-view properties," he added.

"I think it's a combination of worries — 'my money is sitting in a bank with low interest rates, what's going on with the stock market and currencies,'" Witthinrich said of the mindset that may be driving Hong Kongers to buy Phuket real estate right now. "Phuket is known in Hong Kong, and it's easy to go, normally."

"Hong Kong has always been a very good market for us," Reading said of Banyan Tree, adding that he expects to see the trend continue: "With what's happening in Hong Kong now and the influence of China, we're going to see a lot of people looking to make a flight to safety out of Hong Kong."

As for Russian buyers, whose spending power has been greatly diminished by the waves of sanctions their country is facing over the war in Ukraine, Witthinrich said the segment is non-existent right now: "We don't have Russian buyers, because the money doesn't come."

Inbound interest is also coming from Europe, particularly from Europeans who have business connections to Southeast Asia, both Nimpinij and Witthinrich said. Part of this interest may well be from professionals who are finding themselves untethered from desks and able to capitalize on one of the Thai government's two visa programs for foreigners, the Thai Elite Visa and the Digital Nomad Visa.

Shift to lifestyle purchases

Islands from Hawaii to Spain's Canary Islands are seeing a pandemic-exacerbated shift as short-term visitors stay longer and some visitors become full-time residents, The New York Times reported recently.

Phuket is no exception. Both Nimpinij and Witthinrich both said there's been a shift out of holiday homes and into lifestyle homes, specifically those that attract families.

"When I moved here it was all holiday homes," said Nimpinij. Now, seven or eight years later, more families are making their way onto the island. She said Phuket is catering to this very demographic's lifestyle with a series of builds that include Blue Tree, a big aqua park, and Porto de Phuket, the very shopping mall I was describing earlier.

"There are two sections," Witthinrich said of demand right now. "There's one group of clients who are looking for their dream holiday home, a sea-view purchase."

"But particularly for Hong Kong families, they are looking for a home. They're looking for a place to stay," he continued, adding that the demand is for multi-bedroom properties that are suitable for longer periods of time. "They are asking for schools."