Phuket Luxury Villa Market Update September 2016
Villa supply surge in secondary market is creating impact on demand in primary sales Resales and product fatigue cited as transactions Nlatten “The island’s luxury villa market has been heavily inNluenced by a rising secondary sector, with some sellers offering Nlexible pricing due to the impact from global economic conditions. During the past two years, there has been a growing number of secondary transactions, whereas new developments offering luxury products have seen a slowdown in the average absorption rate. Part of the current trend is attributed to owners who bought properties early in the growth cycle and are now seeking to exit on proNit, hence offering Nlexible pricing. Additionally, buyers are becoming more adverse to project phasing due to the problems arising from long-‐term construction. Thus, projects with a shorter development period have reported an accelerated sales pace. Lastly, currency appreciation and depreciation also weigh into the equation, particularly for investors from Europe.
Trends
Primary Market Supply vs. Demand Trend USD (Million)
%
800 700 600 500 400 300 200 100 0
100 80 60 40 20 0 2012
2013
Value of Villas Sold Supply Growth
2014
2015
YTD 2016
Value of Available Villas Demand Growth Source: C9 Hotelworks Market Research
In view of the current market dynamic, we forecast that the sheer critical mass of demonstrated luxury properties and incoming international hotel brands will see demand return in the medium term.” Bill Barnett, Managing Director, C9 Hotelworks
Forward Outlook
•
European nationals from the U.K., France and Germany remain the legacy markets, while Asian clients from Hong Kong, Mainland China, and Taiwan are rising in inNluence.
• Over the next 12 to 14 months, the majority of pipeline projects for luxury villas will include a hotel element, with more global hospitality brands to be represented in the market.
•
Rental management programs are becoming more important as prospective buyers are now seeking an active investment platform with sustainable income.
•
Urban luxury projects in Bangkok and Asian CBD areas have become direct competitors to the resort luxury villa market.
• Design preferences are shifting away from traditional Thai inNluence to a more contemporary style, which is being driven by changes in the demand demographics. • An analysis of the current absorption rate indicates potential growth for ‘right priced’ hospitality-‐led residential properties.
MARKET OVERVIEW • Luxury residential villas are segregated into branded and non-‐branded properties. Presently, there are 13 projects in the primary market, with 2 estate offerings launched last year. • Key factors such as strategic location, established branding and hospitality afNiliation are touch points for pushing higher demand, which can mitigate risks of having unsold villas during the developer’s holding period.
Hotel AfDiliated vs. Non-‐AfDiliated Villas – H1 2016 USD per Sq. m.
Number of Villas 100
4,520 4,500 4,480 4,460 4,440 4,420 4,400
80 60 40 20 0 Hotel Branded Luxury Villas
Non-‐Branded Luxury Villas
Number of Villas Sold Built-‐up Sales Price
Number of Available Villas
Branded properties are most popular amongst developers, making up 83% of new villas product
Source: C9 Hotelworks Market Research
Villa Inventory by Location – H1 2016 Number of Villas 60 50 40 30 20 10 0 West Coast
East Coast
South Coast
Number of Villas Sold
North Coast & Natai -‐Phang Nga
Number of Available Villas
Absorption rate averaged 0.20 villa/s per month, with hotel afAiliated developments having faster sales pace
Source: C9 Hotelworks Market Research
Average Sales Price and Sales Pace by Location – H1 2016 USD per Sq. m.
Sales Pace per Month
8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0
1.00 0.80 0.60 0.40 0.20 0.00 West Coast
East Coast
South Coast
Built-‐up Sales Price
North Coast & Natai -‐Phang Nga Monthly Sales Pace
Source: C9 Hotelworks Market Research
2
C9 Luxury Villa Market Update: September 2016
Built-‐up sales price per square meter average is USD 4,845
MARKET CHARACTERISTICS • Hotel branded projects typically offer two-‐bedroom units while conNigurations for non-‐afNiliated residential villas commonly offer Nive-‐bedroom units. • Price range of USD1,500,000 to USD3,000,000 is the most popular band for luxury villas with premium product speciNications.
Villa Pricing Strata – H1 2016
26%
27%
Unit Mix and ConDigurations – H1 2016 %
Size in Sq. m.
40
2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0
35 30
4%
25
10% 33%
20 15 10 5 0
Under USD1,500,000 Between USD1,500,000 and USD3,000,000 Between USD3,000,000 and USD4,500,000 Between USD4,500,000 and USD6,000,000
Total Villas (in percentage)
Over USD6,000,000 Source: C9 Hotelworks Market Research
Average Built-‐up Size
Source: C9 Hotelworks Market Research
• Supply in secondary market is rising steadily, with the resale segment effectively broadening the competition in the primary market. • Average built-‐up sales price per square meter in the resale sector is 13% lower than those of new properties, with discounting now occurring amongst primary market offerings.
Sales Market Mix – H1 2016
Resale 46%
Resale vs. Primary Sales – H1 2016 USD per Sq. m.
%
5,000
0 -‐2 -‐4 -‐6 -‐8 -‐10 -‐12 -‐14
4,800
Primary sales 54%
4,600 4,400 4,200 4,000 3,800 Primary Market Built-‐up Sales Price
Source: C9 Hotelworks Market Research
Resale Market Discount Rate from Primary Market Source: C9 Hotelworks Market Research
C9 Luxury Villa Market Update: September 2016
3
About C9 Hotelworks C9 Hotelworks is an internationally recognized consulting Dirm with extensive experience in the Asia PaciDic region. Its core business focus includes: • • •
Hotel and Resort Development Asset Management / Ownership Representation Project Feasibility and Analysis
Key competencies include international hotel operator search, selection and contract negotiation, mixed use hotel and residential planning and operation reviews. A wide range of both institutional and private developers and a comprehensive portfolio of completed projects give C9 the skill set and background to focus on key issues, evaluate complex ones and assist clients in achieving solid results. Based in Phuket, Thailand and led by Managing Director Bill Barnett, who has 30 years of experience in Asia PaciNic, the Nirm is well positioned to serve an increasing demanding marketplace.
C9 Hotelworks Company Limited 9 Lagoon Road, Cherngtalay, Thalang, Phuket, 83110, Thailand (OfNice located at the entrance of Laguna Phuket) T: +66 (0)76 271 535 F: +66 (0)76 271 536 www.c9hotelworks.com info@c9hotelworks.com