How to choose a project that will bring more… if it hasn’t been built yet? At the Prian webinar, Alexander Davydovsky, founder and director of the Art House Group, answered the question.
Since the beginning of the pandemic, delayed demand has formed in the Phuket real estate market, which led to a sharp activation of buyers and, as a result, to a shortage of offers. Geopolitics also played a role. As a result, by the end of last year, prices in Phuket approached record levels.
However, there is a downside to the hype. Yes, dozens of new projects are being announced, built and launched for different purposes and different budgets. For example, there are 10 thousand apartments in one stage or another in Bang Tao district alone. This is a huge amount… and it seems that such a number of apartments exceeds the market capacity. But at the same time, a drop in the value of real estate is not expected.
The Phuket market has not yet been fully evaluated, and along with the growing popularity of the resort and its infrastructure, the price continues to rise. It increased even in covid, albeit in minimal values. The same picture will be in this and next year: the cost increase will be minimal. This is a forecast that could be disrupted by investments from China. In previous years, the growth was driven by demand from Russian and European buyers. At the same time, if there is an influx of Chinese investors – and the capacity of these investments exceeds both Russian and European combined – then the leap will take place again.
There is also a high risk of unfinished projects in the next year or two. Especially those announced by small development companies.
Read also: The procedure for purchasing real estate in Thailand
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The entry threshold to the Phuket market is $120-130 thousand per unit. But we must understand that the cost is not affected by the presence of hotel management as such, but by the level of service provided – four or five-star, the proximity of the beach and urban infrastructure. As a developer, it is strange for me to buy land on the first line and not get a hotel operator there.
Example
Our company has purchased a plot literally 100 meters from Karon, one of the most beautiful beaches on the island. There is a municipal park and developed infrastructure nearby. Here we will build an elite apartment Hennessy Residence – please note – under the management of a well-known hotel operator.
The entry threshold is $240 thousand. But the return is more than twice as high when compared with a conventional project.
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From the point of view of capitalization and further resale, it seems most profitable to invest in a project on the first line (or near the sea) and near a developed infrastructure. It really is, but!
Profitability depends entirely on the management company – and even location is not always crucial!
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The presence of hotel management in the LCD is a strong factor. By investing in apartments with professional hotel management, you can calculate the profitability of the project for several years ahead and get a number of guarantees from the developer and the hotel operator. This is an important advantage!
An important point: you should not expect a high and stable income from a project in which several brokers work. This does not guarantee a high and stable income in any way. As brokers begin a price struggle within the same LCD, internal dumping appears.
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The company that maintains your residential complex (monitors the territory, takes out garbage, cleans pools, etc.) is not engaged in renting. It probably isn’t even a commercial structure and is subordinate to a committee of tenants.
When we talk about a management company that provides income, we mean something completely different!
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Who will manage the condominium will be told and decided by the developer. If he has an agreement with a hotel operator such as Wyndham, Hyatt, etc., then the developer is guaranteed to build an asset that will generate income. Because these operators have their own requirements for residential complexes and their infrastructure (pool depth, generator availability, fire safety, etc.).
A developer can also buy a franchise to use a big name and at the same time be an independent operator. But first, of course, it is the franchise that will teach everything, build a management structure, and then check the partner. And if the quality of the services provided does not meet the requirements of the franchisor, the contract is canceled with all the consequences…
Example
On January 19, 2024, we launched a project under the management of a hotel operator. And already on February 1, we had 1.5 million baht in our account. That is, the apartment complex, which has not yet been fully built, brought in an income of $50 thousand in 12 days of operation. And even more in February. On average, the yield from one unit was 13.1% per annum, two units – 11%. This is the final income before taxes. Most of our owners are not tax residents in Thailand, so their personal income tax rate will be 15%. But working with taxes and planning them is a separate topic of conversation that we can devote time to in the future.
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As a rule, an ordinary condominium has a reception, a security department and a management company that serves the common area.
A condo with hotel management is a broad management and service structure that employs hundreds of people. It is a front office for reception and registration of guests, a booking department, a concierge service, sales and marketing departments, maintenance and engineering systems, cleaning and laundry, procurement and supply, security and IT, as well as a restaurant and bar, entertainment and sports facilities. At the same time, each department has a quality department and a supervisor.
Only such a structure can guarantee tourists a real, full-fledged rest. One that people who come to relax for a week or two are willing to pay for. And literally many times more.
Read also: Are you going to buy a property in Phuket? Great! But first, read a few facts and practical tips
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