COLLIERS HALF YEAR CONDOMINIUM | | 2H 2019

PHUKET CONDOMINIUM MARKET Phattarachai Taweewong Research | Associate Director| (+66) 86 546 3683 2H 2019 [email protected]

2020–22 Summary & 2H 2019 Full Year 2019 Annual Average Recommendations Although the Thai purchasing power decreased but foreign Waras Dechgitvigrom “The supply of newly launched units of Research | Manager| Thailand purchasing power has grown continuously in many areas of (+66) 82 398 6893 condominium market in Phuket in 2019 Phuket. The guaranteed rental condominiums are still [email protected] showed that it declined by 29.7% from popular with foreign investors resulting in a quota of 49% of the previous year but the average sales Demand foreigners in condominiums that have rental guarantees to rate increased slightly due to both be full in most of the projects. domestic and external negative factors. It has been forecasted that the condominium market in Phuket area will In 2019, there were 3,555 units of new condominium -70.0% pp -29.7% pp tend to slow down continuously by 2020 projects in Phuket, which decreased by 29.7% from due to the overall economic situation y-o-y and are expected to decrease to only 1,500 - with foreign purchasing power being Supply 2,000 units per year in the future. 813 units 3,555 units 2,000 units declined. Although in 2019, the number of foreign tourists slightly increased but it was found that the demand did not 2020–22 dramatically increase. Condominiums Full Year 2019 Annual Average with guaranteed rental rates are still popular with domestic and foreign The overall sales rate of the condominium supply that were +0.2% pp buyers. The areas with high potential and launched for sale in 2H 2019 was approximately 71% of the receives attentions from buyers are still total 16,652 units under construction, with the highest in Bang Tao Beach, Surin Beach, Kamala Newly selling rate in Thalang at approximately 42% or about 4,943 Beach, Nai Han Beach and the Launched units from the total supply that were currently on sales. 71 % surrounding area of Central Festival Phuket. Developers that will develop condominiums in Phuket in 2020 should Condominiums in the price range of THB3-THB5 target the European or Russia buyers million and prices more than THB10 million were the rather than Chinese buyers as Chinese price range with the best sales rate. It was found that purchasing power tends to decrease condominiums with the price range between dramatically due to the effects of the THB80,000-THB130,000 per sq.m. was the price range trade war between the United States and Price with the highest sales rate. China as well as the weakening of the Renminbi and the spread of the Covid-19 virus, which are predicted to have a huge impact on the Chinese economy in 2020.”

COLLIERS HALF YEAR RESIDENTIALCONDOMINIUM | CHA | PHUKETAM, HUA | HIN2H 2019 AND PRANBURI | H2 2018

Supply Newly Launched Units as of 2H 2019 The overall condominium market in Phuket in 2H 2019 found that there were approximately 813 new condominium projects launched, decreased by 29.7% from 2018, resulting in 2019 to have 14 new condominium projects in Phuket with the total of 14 projects or 3,555 units, a 7,000 45,000 decrease of approximately 29.7% y-o-y, due to negative factors from both domestic and 40,000 international attacks such as the global economy that are still not recovered, the Trade war 6,000 between the United States and China and the Bank of Thailand's new LTV adjustment 35,000 5,000 measures, which was effective since April 2019. 30,000 4,000 The Bank of Thailand's new LTV adjustment is an important factor that slowed down the 25,000 condominium market in Phuket as most Thai buyers buying condominiums in Phuket are 3,000 20,000 investors or those who want to buy real estate as their second homes. Therefore, the new LTV 15,000 adjustment has affected this group of buyers to delay their decisions. For this reason, 2,000 developers who wanted to develop a project for Thai buyers, whether large, central or small 10,000 in the area, decided to postpone the sales of the projects. In addition, the property market in 1,000 5,000 Thailand is still experiencing negative factors from outside the country including the trade war 0 0 between the United States-China, the appreciation of the baht and the war between Iran-

United States of America which affects the confidence of foreign buyers especially the 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Chinese, which is the main target group, to delay the decision to buy real estate. 2020 F Additional Supply Cumulative Supply Aside from negative factors from trade wars and economic conditions Chinese buyers are also faced with the problem of restrictions on bringing out money not exceeding THB1.5 million Source: Research, Colliers International Thailand per person per year, making buying property outside of China even more difficult. As a result, the Phuket property market, which began to focus on the main trading group is Chinese since 2017, has slowed down significantly from 2019.

It has been forecasted that the new condominium supply in 2020 is expected to decline from approximately 1,500-2,000 units in 2019. In addition to the above negative factors affecting since 2019, with the negative factors from the spread of the covid-19 virus in China, which is spreading to other countries resulted the worldwide to be under surveillance. The purchasing power from China, which is Phuket’s main income, decreased dramatically from both the tourism market. Furthermore, the negative factors from the country due to delay budget disbursement in 2020 by the government will result in various development projects, the stimulus from the government that has been delayed for at least 6 months as well as the most severe disaster in 40 years. These negative factors are expected to affect the real estate sector in Thailand and Phuket.

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COLLIERS HALF YEAR RESIDENTIALCONDOMINIUM | CHA | PHUKETAM, HUA | HIN2H 2019 AND PRANBURI | H2 2018

Supply by Location Supply Condominium Units For Sale By Location as of 2H 2019

As of 2H 2019, there were approximately 78 condominium projects that were currently on sales in Phulet, totaling 16,652 units, in which Thalang had the most condominiums being sold for approximately 7,774 units or 47% of all condominiums for sales. This was followed by the area of , with approximately 4,546 condominium units being sold or 27% and lastly in Kathu of approximately 4,546 units or 26%.

For new condominiums launched in Phuket in 2019, there were a total of 14 projects or 3,555 units. It has been distributed in the area of Thalang approximately 5 projects in the amount of 1,681 units or 47% of condominium projects for sale. This was followed by Kathu area of about 7 projects, with approximately 1,587 units or 45%, and lastly Mueang District of about 2 projects or approximately 287 units, which was considered as around 8%. Especially in Cherngtalay, Bangtao, Layan, Surin and Kamala are still the areas that developers are interested in developing condominium projects because the area was surrounded by beaches, a 5-star hotel and many facilities that make this area popular with foreign tourists. In addition, this are also developed infrastructure from the Kathu Thalang Mueang Phuket government and the development of large-scale projects from a large private sector such as 1. Source: Research, Colliers International Thailand The development of the "Porto de Phuket" project of Central Pattana Public Company Limited on a total area of 50 rai with a budget of THB1,000 million to be the first shopping mall with new design Newly Launched Supply Units For Sale By Location as of 2H 2019 that perfectly combines the retail lifestyle and natural space in the open air format, which has an area of over 40,000 sq m in the Laguna area, Choeng Tha 2. "Blue Tree Phuket" Development Project is a large water park project worth THB1,300 billion on 140 rai located in Choeng Thale sub-district. 2,000 The project consists of a leisure service area and a water sports cenrer. It is a 4-story beach club, fitness zone, kid's club, 17 restaurants, both restaurants and budget restaurants. The shopping centre areas include the 'Blue Tree Lagoon', a lagoon-style ocean with a size of over 17,000 sq m, 1,500 making most developers interested in developing condominiums in this area. Most of the projects in

this area are focused on the buyers who want to invest, with each project having a high rental guarantee including guarantee for selling back to the project when held as per the project schedule 1,000 which has received a great response from both Thai and foreign buyers. Units

Patong area, is still another area that developers are still interested in developing 500 condominium projects. However, the land in is limited, left with land with low potential and the price is too high. Therefore, developers who develop projects in the area choose to sell the project with guaranteed rent. 0

Kathu Thalang Mueang Phuket

District Source: Research, Colliers International Thailand 3

COLLIERS HALF YEAR RESIDENTIALCONDOMINIUM | CHA | PHUKETAM, HUA | HIN2H 2019 AND PRANBURI | H2 2018

Demand Take-up Rate by Location, as of 2H 2019

It was found that there were approximately 16,652 units of condominiums in Phuket 100% in 2H 2019 that were currently on sales, approximately 11,860 units were already sold or 71%. The remaining units in the market were approximately 4,792 units or 29%. It was found that condominiums in Mueang Phuket District had the highest accumulated 80%

sales rates at 83%, followed by condominiums in Kathu at approximately 72% and Thalang area being an area where the rate of accumulated sales being the lowest at 60% about 64%

Mueang Phuket District had the highest cumulative selling rate since most of the 40%

projects in the area were sold since 2016, but there were still units remaining in the Take Uo Rate market. In addition, there were not many new units for sale, resulting in Phuket having a higher selling rate than other areas. However, if considering the new units 20% sold in the 2H 2019, it was found that the had the highest new units sold, followed by Kathu and in Meung Phuket respectively. 0%

Kathu Thalang Mueang Phuket When considering the price range, condominiums that are in the price range of THB3-THB5 million were the best-selling price. Most are condominiums that were District spread around the beaches or within walking distance of the beach at a distance of not further than 400-500 meters. This was followed by condominiums in the price Source: Research, Colliers International Thailand range of THB2-THB3 million, mostly were the condominium located in Rawai, Nai Han, in Mueang District area. In which buyers preferred to buy condominiums with the price range between THB80,000-THB130,000 per sq m.

The Research department from Colliers International Thailand predicts that by 2020, the area of Choeng Thale Subdistrict, Bang Tao Layan, Surin, Kamala, Rawai and Naiharn will still be locations that developers, buyers and investors pay constant attention due to the tranquil atmosphere suitable for relaxation, it is popular with foreign buyers. In addition, the area around the Central Festival Phuket shopping centre is still another potential area that is suitable for project development to support Thai buyers who work in Phuket.

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COLLIERS HALF YEAR RESIDENTIALCONDOMINIUM | CHA | PHUKETAM, HUA | HIN2H 2019 AND PRANBURI | H2 2018

Absorption Rate Absorption Rate / Month Phuket Condominium Market As Of 2H 2019

The overall absorption rate of the condominium market in Phuket in 2H 2019 in all categories was approximately 2.7%, a decrease of 3.1% from the previous year as there were still new units launched. 4% The market is continuously increasing but found that the sales rate of new projects launched during

the past period was still lower than expected. With negative factors that are affecting the market in the 2H 2019, it resulted the total absorption rate to decrease. The 2-bedroom type had the highest 3% absorption rate of approximately 3.7% as new condominiums in the 2H had 1 bedroom types added to the market a lot more than the 2-bedroom type but the sales rate was not very high. Therefore, the type of 2 bedrooms with good sales rate and less newly launched unit had a higher absorption rate. 2% This was followed by the 1-bedroom type that had an adsorption rate of about 3.2% and studio type that had an absorption rate of approximately 1.9%, respectively.

1% Phuket condominium projects with a relatively high rate of sales were mostly projects with guaranteed Month / Rate Absorption sales, with return on investment managed by a reputable hotel chain or with repurchase guarantees when held as scheduled by the project, such as the guarantee of rent 5-10% for a period of 3-10 years. In addition, some projects were guaranteed to buy back at full price or 10-20% higher than the 0% purchase price. It was found that there were more than 8,300 condominiums in this type of project Studio 1 Bedroom 2 Bedroom 3 Bedroom being sold and being built in the market, which is considered a form of sales that is very popular nowadays. Room Type

The overall condominium market in Phuket in 2019 markedly slowed down from various negative Source: Research, Colliers International Thailand factors from both within the country and outside the country. However there was still new supply launched over the past several years as there was a benefit from the growth of tourism according to the Tourism Market Research Centre in 2019. Phuket has approximately 14 million tourists, both Thai and foreign tourists, coming in Phuket with income from tourists more than THB471,000 million , an increase of approximately 5.01% y-o-y. The overall real estate market in 2020 is expected to continue to slow down aside from the original negative factors, there are also negative factors from the outbreak of the Covid-19 virus. This will have a relatively severe impact on the tourism industry, which is considered Phuket's main income and will inevitably affect the real estate sector. In the beginning of 2020, there has been some down payment that has been cancelled from Chinese buyers. In this section, some developers have solved the problem by extending the transfer period to Chinese buyers. However for some developers that do not have sufficient financial liquidity, it is necessary to seize buyers' down payments and re-sell these down units. This is resulting in more condominium units being sold in the market. For the condominium market in Phuket, it is still found that the 49% foreign quota is mostly full, being left with the ratio of the Thai purchasing power which has clearly slowed down. The developers should therefore be careful of the launch of new projects in the future as they should focus on releasing stocks that still remain in the market or choose to launch the project in the location with high potential and high purchasing power. 5

Primary Authors: For further information, please contact:

Phattarachai Taweewong Barny Swainson Associate Director | Research | Thailand Senior Director | Capital Markets & Investment Services | Thailand +66 86 546 3683 +66 62 445 0040 [email protected] [email protected]

Contributors: Wasan Rattanakijjanukul Associate Director | Capital Markets and Investment Services | Thailand Ratchaphum Jongpakdee +66 81 443 2048 Deputy Managing Director | Thailand [email protected] +66 63 878 3322 [email protected] Napaswan Chotephard Senior Manager | Residential Sales & Leasing | Thailand +66 85 902 7463 [email protected]

Sorravich Siriwattanapornchai Senior Manager | Industrial Services | Thailand +66 83 077 6445 [email protected]

Hathairat Yoorod Senior Manager | Office Services | Thailand +66 89 919 1923 [email protected]

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Copyright © 2020 Colliers International The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.