My Thailand Guide

Posts Tagged ‘economy’

Once best known in the tourism business for its crazy nightlife, Pattaya is Southeast Asia’s first second-homes realty boom, and the buyers are primarily rich Europeans and Americans.

Last year, the resort sold more than $230 million of beach-side apartments – more than 7.7 billion baht – mainly to foreign buyers.

Although restricted by international standards, the building boom – there are almost 300 apartments and realty projects under way in the Pattaya district – has already raised relate to about aggravated water lacks and rising crime against foreigners.

“Four or five years ago, you could purchase any apartment unit for about $30,000 to $35,000,” said Clayton Wade, managing director of the Premier Homes Real Estate Co and a longtime Pattaya denizen. “They have all at least tripled.”

The valuations are being ramped up by the insufficiency of reasonably priced vacation accommodations in the United States and Europe, a growing epidemic market for beach-side realty and a lot of speculation, including some money- laundering activity.

“We’ve got plenty of bad business in this city,” Wade conceded.

Similar housing booms are taking place at Thailand’s other beach resorts – Hua Hin, Samui and Phuket – and to a lesser degree in other Southeast Asian objectives, especially on Indonesia’s Bali.

And the take-off in second-homes sales is not limited to Southeast Asia.

Europeans are crowding to Croatia and Bulgaria to travel Mediterranean villas that are cheaper than what’s on offer in Spain. Americans are traveling south to Mexico, Costa Rica, Panama, Nicaragua and Honduras in search of accessible getaways.

The international migration from the developed world has been unleashed by a number of factors. For starters, there are a lot more wealthy people in the wealthy countries, and much of this new wealth has been generated off real estate.

According to estimates by The Economist magazine, the value of residential property in developed countries increased by more than $30 trillion from 2001 to 2005, an increment tantamount to 100 per cent of those countries’ gross domestic products.

The Economist’s dire prognosis in 2005 that this property boom is the world’s biggest bubble that is about to kaboom has yet to be actualized. Instead, the bubble has spread to more outlying shores.

“Globally, what’s happened now is there are a lot of people not just buying an other home but finding that investing in real estate makes money,” said David Simister, chairman of the real-estate company CBRE Richard Ellis in Bangkok.

Simister is selling luxury estates on Thailand’s Phuket island, some of which are fetching up to $5 million. The foreigners who are buying these properties are usually reselling them at a great profit.

“People are very clever investors,” Simister said. “They know realty is an appreciating asset and absolute beachfront or ocean view is a restricted commodity.”

In other words, the estate boom has gone worldwide. It helps that the world is a much more connected place and that even far-flung places are often easily approachable.

At your $5 million villa in Phuket, you are a hour’s drive from an international airport that can take you to any country in the world. And rather than queuing at a tourism agent’s you can book your ticket via the internet from your home computer while watching CNN on cable TV and munching on some Kentucky Fried Chicken, home-delivered.

This is all great news for the rich. Construction on deluxe condominiums and villas is also good business for local economies, providing jobs and new markets for nearby suppliers of goods and furniture.

But there are downsides.

Take a look at Spain, which vaunts the largest second-homes commerce in the world, worth more than 4 billion euros ($5.2 billion) in sales yearly.

Overseas buyers have driven up accommodation prices at double-digit rates, making homes largely unaffordable for most Spaniards. Around 30 per cent of Spain’s young adults live with their parents.

Sales of prime real estate to individual investors can also mean lost opportunities for the local tourism industry as the example of Galle, one of the most popular sightseer destinations in Sri Lanka, shows.

“We are having a big problem as foreigners have purchased residences in Galle city, posing a serious setback to the local tourist industry,” Mayor Kelum Senaratne said.

“At least 40 houses have been purchased outright by foreigners in the Dutch Fort in Galle, and they are making renovations according to their own will despite the fort being declared a World Heritage site by UNESCO,” the mayor said.

Social scientists have expressed cares that this new migration of wealthy foreign homeowners into the developing world could end up causing more public problems, such as rivalry for water resources and rising crime, than the economic opportunities are significance.

“Governments think about [realty] improvement in terms of investment, job creation, incoming dollars but not in terms of the social impact on the local population,” warned Allen Cordero, professor at the Latin American Faculty of Social Sciences in Costa Rica.