Phuket developer touts guaranteed yield strategy

PHUKET: With the pandemic ravaging the tourism industry and slowing the property market on the islands, a local developer is pivoting to a guaranteed yield strategy, aiming to sell to buyers and rent to uncertain workers.

Phuket developer touts guaranteed yield strategy
Business Phuket developer touts guaranteed yield strategy published : 5 Apr 2021 at 04:30 newspaper section: Business writer: Kanana Katharangsiporn Patong beach in Phuket is deserted because of the pandemic. APINYA WIPATAYOTIN PHUKET: With the pandemic ravaging the tourism industry and slowing the property market on the islands, a local developer is pivoting to a guaranteed yield strategy, aiming to sell to buyers and rent to uncertain workers. Thanusak Phungdet, president of Phuket-based property developer VIP JD Group Co, said the Phuket market has been stagnant since March 2020 after the province was temporarily closed and tourism activities halted. "Foreign buyers cannot fly to Phuket," he said. "Many property projects were delayed or frozen until borders are reopened. If quarantine is not required for vaccinated tourists, the market will definitely resume." Mr Thanusak, also president of the Phuket Chamber of Commerce, said the property market grew in tandem with the healthy tourism sector. If tourism does not rebound to the same level as in 2019, the property market will be slow to recover, he said. The Phuket Tourism Association reported tourist arrivals to the province totalled more than 14.5 million in 2019, up from 14.4 million in 2018. Some 73% were foreign tourists, led by Chinese, Russians, Australians, Germans and British. Revenue from the tourism sector rose to 472 billion baht in 2019 in Phuket from 449 billion the previous year. However, it plunged 75% to 108 billion baht in 2020, with 91% recorded from January to March before the lockdown. Association president Bhummikitti Ruktaengam said Phuket's economy relies heavily on tourism and tried to shift to Thais from in October to December last year, but only recorded 180,000 visitors during the period. Mr Thanusak said Phuket had 1,945 accommodations, featuring 100,000 rooms, which exceeds Bangkok. Now only 1,000 rooms are open and the average occupancy rate is only 10%. Since March last year, unemployment in tourism and related sectors totalled 150,000. Daily flights declined to zero from a peak of 370 flights per day, which brought in 80,000 passengers to the province, he said. In January 2020, VIP JD Group launched its first project, VIP Great Hill Condominium, on a one-rai site in Nai Yang, only 2.5 kilometres from Phuket airport. The project worth 350 million baht offers 215 units priced 60,000 baht per square metre. Sales stand at 60% despite the lockdown. Of this amount, 38% were bought by foreigners, mainly Chinese and Russian. "Phuket airport is growing rapidly and the number of residential units nearby are insufficient. There are more than 10 hotels and government agencies in the area," said Mr Thanusak. He estimated total employees at these hotels, logistics firms, the airport and immigration officials at 3,000-4,000. To increase sales, the company launched a guaranteed yield of 6% for the first two years, with 70/30 profit-sharing in years 3-7. Unit owners can stay free for 15 days per year. The project is scheduled for completion in August. "We are targeting both buyers and tenants working in the airport and surrounding areas," he said. "We are confident we can manage rent as we have a list of airport workers who want to rent rather than purchase because of the downturn in the tourism sector." Mr Thanusak, whose main business is JD Pools Group, said sales of swimming pools last year were higher than expected at nearly 900 million baht, equalling the 2019 level despite the decline in exports. "People mostly stayed home and renovated, in addition to a wellness trend and government sales," he said. Do you like the content of this article?