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Despite the global credit crunch and economic instability in Thailand, property experts say Koh Samui has managed to surmount its recent obstacles to become a thriving niche market based on solid market fundamentals – including an increase in Thai investment.

At recent property seminar held on the penultimate day of the 7th Koh Samui Regatta in June, John Birt, CEO of Samui Villas and Homes, outlined a number of reasons to be positive about the island´s property market in the years to come.

According to Birt, the arrival of major, branded mixed-use developments on Samui is a sure sign that the island will continue to draw investors, particularly at the high end of the market. "The Four Seasons residential villas are already 75 per cent sold out, I believe", he said, "and with other major players like W Hotels, Conrad, the Oriental Group and Banyan Tree building in various parts of the island, the future looks very positive.”

In addition to these branded developments, Birt also pointed to a recent increase in land purchases from major Bangkok-based Thai investors, a rarity until recently as Thai buyers traditionally prefer locations with easier access to the capital. He cited a fall in stock market prices and reduced interest rates on bank deposits as possible stimulation for an increased interest in land acquisitions. Major purchases such as a recent sale in north Chaweng Beach that achieved a reported Bt100mper rai seem to support the theory that confidence is still high on Samui.

Since the lull caused by the 2006 military coup, many of Koh Samui´s property developers have been working to consolidate the island´s appeal as a high-end niche market. Major international developers like Dhevatara Properties raised the bar by committing financially to projects before pushing sales and this in turn attracted a new breed of investor with deeper pockets and higher expectations. Birt said that with beachside properties very difficult to come by in competitor destinations like Phuket, Samui is now taking the lead in luxury villa construction and often achieves higher prices for properties than its big sister. In addition, with financing virtually non-existent for foreigners in Thailand, except on selected developments, the market is still largely driven buy cash purchases. "I saw two private jets parked at the airport the the other day,” he said. "These kinds of investors are not going to be directly affected by a global downturn. People who pay cash tend to use spare cash."

Despite such optimism, Koh Samui´s infrastructure still falls far short of expectations, particularly the island´s roads. However, there are signs of a more concerted effort on the part of the local authorities to address this issue with road widening and drainage projects in crucial areas such as around the airport. John Birt believes the arrival of big international brands and reputable developers will stimulate property companies to "show more substance", and added that "everything that´s wrong can be fixed". In fact, his company is currently in the process of implementing a number of measures to reduce both its own and its guests´ carbon footprint buy installing energy-efficient devices, recycling systems and comprehensive waste management policies. The concept of a green island is beginning to emerge as an important differentiator for Samui, especially since the Tourism Authority announced that it was switching its focus to Koh Phangan for international, eco-tourism publicity campaigns.

Obviously, in a resort destination like Samui, the property market is heavily dependent on tourism to generate customers and with a year on year increase expected for the foreseeable future, especially once the new branded resorts begin operations, the outlook is bright. According to the Tourism Authority of Thailand (TAT), at the end of 2007 Koh Samui had 403 accommodation establishments offering 14,405 rooms, a substantial increase on the 360 hotels with 13,290 rooms in 2006. This is expected to rise to 15,500 rooms by the end of this year. Meanwhile, Bangkok Airways offers 3,600 seats daily to Koh Samui from a rangedomestic and international destinations, including Bangkok, Singapore, Hong Kong, Krabi, Phuket, Chiang Mai and Pattaya (U-Tapao). The company´s average load factor is 85 percent, which means Bangkok Airways brings in more than 3,200 passengers per day. On the Bangkok-Samui route alone, the airline operated 21 daily flights with 2,058 seats last year at an average cabin factor of 90 per cent. Capacity on this route is expected to increase this year, with Bangkok Airways planning to replace its 125-seat Boeing 717 aircraft with 144-seat Airbus 319 planes. Thai Airways also fly daily to the island using the 149-seat B737 aircraft; this has not only increased capacity, but also spread the island´s fame internationally, which has resulted in a more diverse customer base.

In terms of new residential developments, the island is awash with new high-end projects. At the more boutique end of the market, there are luxury villa developments like The Lotus Terraces in Bang Por, an exclusive beachfront project of six villas and five terraced homes by the beach, and The Sea, boasting six boutique villas and 15 condominium units. Meanwhile, larger villa developments include the Horizon Villa project, built by Profmil, the island´s largest construction firm and featuring 65 luxury villas on 43 rai of land just a two minute walk from Choeng Mon beach. Then there´s the spectacular Koh Samui Country Club, with Woods Bagot architecture comprising luxurious hotel apartments and eight villa residences, set around a club house with complete facilities for sports, fine dining, spa and wellness treatments.

With the scale of investment now reaching an impressive level on Koh Samui, John Birt and many of his fellow property professionals believe the reasons to be cheerful are considerable.

 

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