Finance: A good time to invest in Phuket

PHUKET: I am asked so often about Phuket real estate that I find it a good topic to address from time to time. Of course, there are legal hurdles to consider, but I will leave that aside for today and focus simply on the issue of timing. Is now a time to be buying or fleeing the island?

As with any investment, the first thing one needs to consider is his or her time-frame and risk tolerance. A zillionaire looking to park cash somewhere for generations, and a working class family looking to buy their first home. will obviously consider very different things. When trying to decide if now is the time to buy, or even if ‘here’ is the right place to buy, it’s best to look at it from a few perspectives.

There seems to be an ever increasing amount of supply on the island – new condos and other developments continue to emerge in every corner. One advantage of being an avid cyclist is that I am always exploring new parts of the island or revisiting old ones to see how they change over time. New developments continue to spring up all over and as we could be approaching the end of a cycle, I would be wary of buying off-plan at the moment.

When considering any investment, you should look for a return that is disproportionately bigger than the risk. By buying off-plan, you may gain an additional small percentage by receiving a discount off the prices that units sell for once construction has been completed. This often entices people to buy off-plan, but I feel that the increased risk is disproportionate to the gain. In general, you want to look for an asymmetric risk-to-return in investing. This means you risk losing a little to potentially gain a lot.

However, when buying off-plan, you risk a hundred per cent if construction never happens. In the current environment, I think this risk is greater than normal. In fact, some units on the island end up selling for less than the off-plan price in the end, so the additional updraft from buying off-plan is not guaranteed.

If you buy finished construction units, you are still not guaranteed that in the short-term the price of what you bought will go up rather than down, but at least you know what you have in terms of bricks and mortar. I personally don’t think there is a bad time to invest in real estate if your investment horizon is correct. In 30 years, I’m sure we will look at the market and wish we could buy at today’s prices. In 3-4 years, however, we would need a crystal ball.

If you can afford to get money tied up, you need not worry about short-term price direction. If you can afford to lose a deposit on an off plan purchase without batting an eye, then the risk of a developer going bust is not that big of a worry.

Your own situation is often the key to knowing if any asset class is right for you at a given point in time. If the population of Asia continues to grow as anticipated and projects like the light rail come to fruition, now is a great time to be buying in Phuket. The key question, though, is “would you want to live in it?”

For me, the answer to Phuket real estate is a resounding yes.

David Mayes, MBA, lives in Phuket and provides health, wealth and life coaching to expatriates around the globe. He has been involved in financial markets for 15 years and specializes in tax efficiency and UK pension transfers. He can be reached at lifeisamazingthailand@gmail.com

— David Mayes