Editor: Cheyenne Hollis
Dot Property Blog March 2020
Rental returns are what most people are after these days when buying Phuket property. In fact, CBRE found that 90 percent of the condo units sold in the first half of 2019 were investment-oriented properties. The developments offered either a rental management program or rental yield guarantee. It is a similar story when it comes to the villa market as well. In the same CBRE report, new villa sales were dominated by investors who wanted rental income. Villas priced below THB 35 million were the most popular, accounting for 81 percent of all villas sold during the first six months of 2019. Now that we understand buyers are buying Phuket property for the return on investment, the question then shifts to, “How much are they making?” Unfortunately, the picture is a bit murky. And since there aren’t any reporting requirements for rental income, finding out is not easy. We know what the guaranteed returns (more on that in the next section) of many Phuket projects are. But we can only estimate beyond that. There have been no reports of rental yields cratering at those investment-oriented developments once they are operational, and this is a good sign. Tourism to Phuket has been so strong that it’s almost impossible for a property with a rental management program in place to lose money without some gross mismanagement occurring. That being said, we are now entering uncharted terrorists with the spread of coronavirus. Chinese arrivals to Phuket have stopped entirely and fewer people are traveling to Phuket on the whole. If the situation continues for an extended period of time, Phuket rental returns could take a serious hit. Phuket rental returns for long term properties turning our attention to traditional condo unit and villa properties, your Phuket rental returns will be dictated by two factors: location and finding tenants. Attracting longer-term tenants to a Phuket condo unit can be a slog, but if you do, getting a 5 percent return on investment is likely. You can try and go the Airbnb route as well, but it does come with some risks. Villa rental returns tend to top out at 10 percent after you factor in property management costs and other fees. This is assuming you have a well-designed villa in an in-demand location. If you have an old villa with ugly furniture in the middle of nowhere, well don’t expect anyone to pay money for the privilege of staying there. That being said, there will always be demand from families and large groups for villas in Phuket and they are far easier to rent out than condo units. Even smaller residences in hillside locations away from the beach can draw in 5 percent rental returns assuming the property isn’t a total dump.