Date Added:
22/9/2009
Every cruising market eventually loses momentum, but will a second wind follow swiftly for Koh Samui? And what form will it take? James Cook talks to the survivors of the recent slump and assesses new arrivals to the island’s shores.
A five-year property boom ended abruptly on Koh Samui when a series of high profile investigations into land encroachment coincided with the strict enforcement of the Foreign Business Act. The latter made it considerably more difficult for foreign investors to buy land through a Thai registered company, and with added uncertainty after the military coup, Samui’s once soaring market seemed to be facing a bleak future.
Yet despite an undeniable lull, major investors continued to steer a course for Samui, with keen interest arriving from several new sources. The island´s resilient appeal as a tourist destination stimulated some significant international investments and corporate brands happily moved into the turbulent waters most local firms were keen to avoid.
Today the island´s property sector is already looking both more stable and more diverse, with residential investment trends moving toward resort-managed properties and widespread expansion in the commercial sector to meet increasing demand. Koh Samui may have had the wind taken out of her sails, but after a sustained period of doubt, there is a buoyant sense of imminent recovery. In fact, many sources within the property industry already see the island moving into a more sophisticated and sustainable phase of development.
“I think some people mistakenly made excessively negative comments about the market,” says Gary Elton, CEO of Frangipani Bay Properties, one of the island’s most successful brokers and developers with three exclusive residential villa projects. “There is a pent up demand for all properties across the board, and as a company we’re very busy developing and acquiring on behalf of syndicates from abroad, as well as expanding our own investments.”
Survival Tactics
Such positivism has certainly helped in the face of adversity. An early response to market consolidation on Samui saw firms that had previously relied heavily on the sale of raw land being forced to switch their focus toward project pre-sales and high-end rental services. A handful of international developers with deep pockets chose to forge ahead with expensive construction projects based on the notion that savvy international investors would not be deterred. Meanwhile, some companies simply sat back to wait for law changes and others adopted alternative ownership structures such as renewable leases to bolster sales. Most local agents also diversified their interests, expanding into the property resale sector, as well as adding more residential projects and rental properties to their portfolios. At Kalara Properties, Director Justin Freeden was thankful for his company’s own developments.
“We were lucky that we’ve had our own developments completed,” he explained, “even though there was a slump anything priced well with good quality in excellent locations was selling and clients weren’t afraid to spend.”
Since April, Kalara has sold nine townhouses from its own development, and a total of 12 since the beginning of the year.
“Not too bad for a slump,” says Freeden. But the company has also re-assessed its pricing in order to maintain sales. “We are trying to price land and houses more correctly,” he continued. “We want to imply a bit of a slowdown, other agents are sometimes as much as 30-40% higher than us, which we just don’t see as realistic.”
Such an approach is one of many changes in attitude that have emerged since the Samui slump began. Many of those within the property sector believe there was a need for self-correction because boom conditions were stretching the island’s capacity to deliver. Market reassessment also prompted more clarity in terms of the island’s target clientele when a significant drop in potential buyers on the ground prompted many firms to concentrate on marketing their projects abroad. This meant taking their products on the road with stands at international exhibitions in places such as Hong Kong, Dubai and London. For Gary Elton at Frangipani Bay, such an approach is crucial, especially at the top end of the market.
“The bulk of our marketing work is done by building up contacts with people abroad and to this end we are beginning to exhibit overseas,” he explained. “We hope to also deal with wealth management for non-Samui residents that would like second houses or a summer house here.”
Gary believes that people who buy US$2-4 million homes are more likely to make a studied consideration of their investment from abroad, rather than spontaneously decide to spend millions of dollars whilst visiting Samui. He also feels that larger investors look at history and understand that places like Thailand are volatile from time to time.
”At the moment, the smaller investors are cautious with investment in Thailand,” he said, “but I think that this is short term and is a sentiment that is going to change. There are still great opportunities for investment growth.”
Wider international exposure may bring more considered investment, but this will also mean Samui faces stronger competition from rival destinations. At a recent exhibition in London, for example, some Thai agents reported that countries like Malaysia and Vietnam were actively highlighting Thailand’s political instability in order to promote themselves as an alternative investment destination. In addition, countries in Europe can now offer cheaper options than Koh Samui, with financing and other benefits attached to deals.
Adam Stanborough, Business Development Manager at Samui Estate Corporation says that despite Thailand’s enduring appeal, places like Samui have to take such international competition very seriously.
“In Europe, 100% mortgages are available on attractive rates with very little deposit to be paid,” he said. “Also, European developers are more realistic on prices and promotions. The approach is steadily changing in Thailand, with more developers becoming less greedy and playing to the buyers market.”
The arrival of more established companies and consequently higher quality products will certainly help Samui compete in an increasingly tight market. Strong international interest has already arrived on the back of several large brand investments around the island. The Four Seasons opened last year, and since then there have been project announcements by W Hotels, the Banyan Tree and Conrad, all of which include residential elements. These high quality products are represented by large, international agencies like Savills and CBRE, which in turn will attract a new type of client to Koh Samui.
“On Samui, the larger brands will begin to pull investors away from non-branded products,” says Robert Collins, Managing Director of Agency and Investment Services at Savills Thailand. “Experienced regional sales teams will offer a more co-ordinated marketing and PR strategy to target suitable clients.”
All this interest and investment bodes extremely well for a swift and sustainable recovery on Samui, with higher quality products and greater security for investors. The island’s more experienced real estate players, like Gary Elton, hope the development process will match the expectations of new clients.
“I don’t think there will be any rapid change in the situation,” he said. “I think it will be a gradual levelling out and that the market will rise from there. Hopefully it will be a gradual rise rather than a rapid rise. This will give the community and the island itself time to breathe and catch up with what’s been happening. In the long term, the current levelling will actually provide benefits for Samui.”
New Directions
Based on current investment profiles, it is clear that resort-managed property is set to become an important growth area on Koh Samui over the next few years. In addition to the new brand name residences mentioned above, top end hotels like the Napasai and Baan Taling Ngam resorts already manage and rent out privately owned villas onsite, while the island’s biggest name, the Four Seasons, will also soon boast its own range of exclusive residential options. Some industry professionals believe that this approach is the perfect solution for Koh Samui as it provides investors with the security of full service, branded products while at the same time complementing the island’s growing reputation as a quality resort destination.
“The island is going through the same stages seen in most resort destinations,” says Charlotte Filleul, General Manager of Resort Properties at CBRE. “It’s moving from a straight tourism market to a retirement and residential location. The arrival of more brands will improve quality through competition.”
However, new developments on Samui do not stop with the brands. Several independent, high profile projects look set to compete with the big resorts and change the island’s property landscape significantly. The much-publicized Infinity Samui project is one example, scheduled for completion in November next year. This “enclosed, private domain” in Bang Por will feature two phases - the first located on a hillside with 28 apartments and six penthouses, some with private pool, the second phase set in an area of coconut grove and consisting of 25 spacious apartment villas and six penthouses, all with private pool. The site will also feature round the clock surveillance to maintain privacy and security and exclusive hotel-style services such as massage, spa, babysitting, car wash, room service and housekeeping.
“The Infinity project is selling extremely well,” says Adam Stanborough from SEC. “It’s a very attractive, well designed package and all the clients who have bought there prior to July have already profited by a rise of 25% in value. This project is aimed and designed for the buyer, not the seller. More developers need to work like this.”
In a similar vein, the Peregrina Bay development at Laem Set, also marketed by Savills, features 12 luxury villas and a further 25 low-rise garden condominiums due for launch in September. This project has received a lot of media attention due the involvement of several leading figures from the British Premier Football League, including Sven Goran Eriksson. In fact, subsequent speculation that David Beckham may also be eyeing Samui as a potential investment has raised the island’s international profile considerably in recent months.
Another well-publicized project that recently broke ground is the Royal Samui Marina, which not only boasts high level Thai patronage, but also constitutes the island’s first large scale marina development with mooring facilities and direct ocean access for boating enthusiasts. This project, scheduled for completion in three years, includes 25 low-rise condominium units, as well as 22 luxury villas, all of which will be built by Kalkin Construction and Development, an international consortium that boasts French, Swiss, American and Thai expertise.
Until recently, condominiums were not a significant feature of the Samui property scene; most developers focussed on private villas. However, with the widespread introduction of the 30+30+30 year lease options as an alternative to Thai company purchases, plus an ever-diminishing land supply, approaches are changing fast. As well as large-scale projects like Infinity, many smaller new residential developments will feature apartments, and the condo projects already under construction such as Kirikayan, Arisara and Casavela are selling well.
“We’ve already sold some condominiums down in Laem Set,” says Justin Freeden from Kalara. “At Bt15 million for a 2-bedroom apartment they are doing well and we’d like to see more condominium projects on the island.”
Such sentiments are being answered with serious interest from big players such as Raimon Land who are currently undertaking due diligence with a view to developing two areas on the island.
“There are very few condominium developments on Samui at present,” says Henri Young, the company’s Marketing Manager. "With local developers less keen than before to build themselves, now is a good time for us to invest in such projects.”
Design Drive
With an increasingly sophisticated client base, more international brands and a number of new condominium projects coming online, design concepts on Samui are changing rapidly. In the early days of the property boom, most buyers opted for traditional Thai styles, but a more contemporary sensibility has since superseded these designs, both in terms of exteriors and interiors, with minimalism and open spaces replacing classic Asian living concepts.
On the architectural side, companies like SWR-CEC Construction, one of the island’s most prolific construction and design firms, has already built some of the region’s most spectacular villa residences on Koh Samui. As a result, the island now increasingly attracts big name architects, influential designers and international product lines, and this will certainly stimulate a greater focus on quality designed and finishes.
Gary Fell’s innovative Gfab team, for example, have designed “Aqualina”, a new villa development located in the north of Samui. The 18 residences challenge traditional living concepts and even boast roofs that extend all the way to the floor with a series of stepped planters irrigated by an integrated system intended to recycle water, bringing a new conception to the notion of the grass roofed tropical house.
When it comes to interior design and furnishings, a wealth of retail choices is now available locally, which allows for more variety and personal preference. According to Nathan Rogers, Creative Director at Ruen Interior Design, a new wave of buyers tends to select the kind of furniture they have in their homes back in Europe.
“There are still strong Asian influences,” he said, “but we’re seeing a move away from typical tropical furnishings such as water hyacinth and rattan. New materials like pineapple fibre, paper products and synthetic rattans and woods are becoming very popular.”
Design innovation is an integral part of Samui’s evolution as the island redefines itself and moves beyond frontier status into a new era of sophistication. There may be a way to go yet, but both the survivors and the new arrivals see much more than hope on the horizon. “There’s a lot of excitement about what’s happening with the new developments,” says Justin Freeman. “If you’re not in a rush why not wait and see what’s coming up.” |
