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HK expats dominate Phuket market

Not all Hong Kong flat seekers are speculative. This is evident in their prominent position in the Phuket property market, where buyers are seeking villas rather than investments.

Instead of capital appreciation, they are eyeing the sea - and the sand and palm trees that go with it.

While villa prices have already gone up 20 per cent this year, it is not easy to book the profits as the island's secondary market is still at an infant stage.

But Hong Kong buyers, mainly expats, make up more than half of the market, while others buyers are from Singapore and Europe.

'The percentage of Hong Kong buyers has been very stable in the past couple of years despite the economic downturn and the outbreak of Sars,' said Stephen O'Brien, managing director of Knight Frank Chartered (Thailand), who has been based in Phuket for two years.

Most Hong Kong buyers just want a resort-style second home in Phuket, and pay little attention to rental returns.

'We sometimes suggest buyers rent out their homes while they are away for most of the time so they can cover the cost of owning a flat, but few of them are interested,' Mr O'Brien said, adding that a villa with a decent sea view could reap a rental yield of up to 8 per cent.

He expected to see more interest from overseas buyers as more affordable projects became available and airline coverage developed on the island, which used to be dominated by high-end villas that now sell for more than 4 million baht (HK$750,000).

In view of the increasing interest in villas, developers on the island began building mid-range properties two years ago.

'About 70 per cent of the villas are priced below 20 million baht,' Mr O'Brien said

The market has also seen an increase in large-scale developers, the latest being Royal Phuket Marina, a 6 billion baht investment from Binatone Telecom Group chairman Gulu Lalvani.

The development will be marketed in Hong Kong in the next few months.

The 500-house project is the largest residential development ever built on the island. It features a huge price range for its villas, from 9.5 million baht to 68 million baht.

However, poorly managed properties, which are not uncommon in Phuket, are still a concern for villa seekers, and this has hindered development of the secondary market.

'There must be some reason behind selling a villa in Phuket aside from couples getting divorced, and it's out of a poor management company very often,' Mr O'Brien said, adding that property consultants were not stepping into the local secondary market just yet.

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