Bear in mind, firstly that Sterling was around 52 to the baht this time last year, so Y-Y is less than a 5% difference. In the meanwhile Sterling was very strong in the face of a weak USD in 2009 and gave UK purchasers more purchasing power.
2009 was not a year for Phuket purchasing, so relatively few took advantage of the strength, however UK buyers were much more active in places like Miami, where super luxury gabled mansions in Palm Beach fell as much as 60-65%. With Sterling dropping this last few months and a rally in the USD buyers picked up a double whammy. A small uptick in prices and general stabilization in distressed US property prices also helped.
Here in Thailand the UK buyers remain solid, lifestyle buyers, who buy more for retirement than for investment. Would be buyers were not impacted so much by the currency, but more through lack of distress sales/bargains in our Phuket market. Throughout 2009 and into 2010 Phuket has again shown resilience in the face of global financial weakness much as we saw during SARS, then the Tsunami, then the Red shirt problems.
Buyers are returning cautiously, off plan developers need serious proven cash reserves/sales and proven building experience on site to gain trust, and attain premium development prices, which properties like Andara, Istana and Mandala have seen in 2010. Cash & Quality is King.
The Thai baht is stronger given overall net inflows to Asia from European and American long term investors, who feared the worst from a Greek default fallout, and from a double dip recession in the US this year. China and India continue to power our smaller Asian markets, and Thailands macro story, albeit with political question marks has been very solid with the Bank of Thailand forecasting GDP growth in 2010 of up to 5.3%.
Jeremy King of Bangkok based Knight Asset management believes that the bahts strength is its new status as the de facto currency in the Mekong region, also supported by a weak dollar.
“The Thai baht remains one of the soundest currencies in Asia, backed by US$ 140 billion in reserves (larger than China’s proportionate to the economy), a record trade surplus (US$ 19 billion 12 months rolling), and a strong banking system with low government, corporate, and household leverage. The silver lining to the political issues is that Thailand missed out on the global increase in leverage in the mid 2000’s. The recent strength in the baht may be more obviously attributed to the foreign portfolio flows into the stockmarket, but this could be offset by political outflows; more likely the strength is due to the growing role of the baht as reserve default currency in the Mekong region as Vietnam (particularly now the dong is being devalued), Myanmar (gas deals), Laos and Cambodia hoard baht rather than US Dollars.” says Mr King.
Thailand has a great opportunity to benefit economically from sustained Asian growth, strong macro fundamentals and structural weakness in both the Euro zone and North American economies into 2012.
Phuket as a property market is reaching maturity, limited land is available on the west coast, Indigo research suggests few new luxury projects are being launched in 2010 and few quality resales are offered. Our experience in February is that global interest remains buoyant from high end players who continue to spend on lifestyle and quality of life. Indigo Real Estate expects quality luxury housing stock to tighten further and we expect developers will on average increase prices by 10% or so in 2010. A stronger baht will have major long term implications that would support the Thai real estate market. |
