With the recent application of stricter foreign ownership regulations on Koh Samui, it comes as no surprise that the first condominium projects have broken ground over the last year. Unlike Phuket and Pattaya, the island has not yet been a major target for this type of development, mainly because of strict adherence to Samui’s restrictive building code, which limits a building’s height to 12 metres. But things may be about to change.
In Thailand, a foreigner can personally own a building, but not the land it sits on. Therefore an apartment within a condominium provides an obvious solution to the foreign ownership issue. In a condo building, a foreigner can own 49% of the total floor area, not 49 out of 100 units, either as a lease or by setting up a legal vehicle to own the freehold title. After it has been properly registered, the condominium juristic body then owns the land title.
Along with legally owning it, another advantage of buying a condominium is that by definition it is generally a managed property. An owner can use it and then lock it up while away knowing that the building and common areas will be looked after. Alternatively, they can leave it under contract management and have it generate income in their absence.
Condos are also the most cost effective way to use land, especially in places like Samui where various limitations apply. The emphasis here is on linear rather that vertical construction, which means some interesting, innovative designs will soon appear to challenge the limits of the 12 meter rule.
Impacts on Samui’s property market
According to industry experts, in the future, Koh Samui will see more large, professional developers from Bangkok taking on medium-sized, low-rise developments. These developers will come in with the initial financial means to build and develop the projects. This is because sensible buyers are becoming increasingly wary of developers who use staged payments to build properties. Recent investor behaviour show that people are now much less interested in paying in advance for something that isn’t built yet. “This trend will shake out the amateurs in the marketplace and slowdown the island’s land value inflation,” says Robert Collins, Managing Director of Agency and Investment Services, Savills (Thailand) Ltd. Also, because of the restrictive building code, other professionals believe smaller top-end developments will prosper. “There is a future continuing market on the island for small and medium-sized condo projects especially in resort, villa and condo combinations,” he said. “This is because of the 12 meter rule. Large-scale developers will pass on building on the island,” says John Birt, Managing Director of Samui Villas and Homes.
Another factor that will inhibit large-scale developments on Samui is the island’s cash market. Investors still prefer to use cash on hand with no financing, which means no leveraged market where banks and building funds are buying into the developments. In places like Bangkok, where condominium developments are financed or bought on plan with a small down payment, it is easier to walk away from since there is not a massive financial risk. On Samui, however, few foreigners will ever get local bank financing to build. “The combination of a cash market and the building code will have a positive effect on the future condo marketplace on Samui,” affirmed Birt. “This indicates that the island will not suffer from the kind of boom and bust scenario that can result from a leveraged market.”
Expected to be complete by October 2007, Casavela in Laem Set is marketed by Samui Villas and Homes and will have 32 units in three buildings incorporated onto a 6 rai (2 acre) hilltop location along with two separate villas. All the units are designed to have a “sea view from every angle” and the facilities include swimming pools, a business center, gym, sauna, a children’s playground, BBQ deck, central kitchen, laundry service, housekeeping, CCTV and 24 hour security. Two bedroom, two bath 144 square metre residences will cost 13,100,000 baht, while the three bedroom, three bath 221 square meters apartments are Bt19,800,00.
Due to open in mid 2008, Peregrina Bay, with Savills (Thailand) as property managers and sole marketing agent, is a luxury low-rise development in Laem Set, and has six duplex condominiums, two beach front villas and four garden view and ocean view villas. The property is on a secluded beach and each condo will have its own ocean-view swimming pool. Each unit runs for Bt25 million, covers 423 square meters, has three bedrooms and is being billed as providing quality of living on par or exceeding the more expensive villas for sale on Samui. Ex-England coach Sven Goran Eriksson has famously invested in this project.
Kirikayan, available through Samui Estate Corporation, is located in the hills on the north side of the island one kilometre above Maenam. The developer promises that unlike many projects set back from the beach, their location will not require driving on poorly maintained mountain roads as they have put in their own access. The project has 18 two-bedroom apartments and penthouses available that run from 125 to 240 square meters and start from Bt6.3 to 9 million. The company guarantees a spectacular ocean view, an exquisite spa that should rival the top resorts on the island and private and communal swimming pools. They expect to complete construction in December 2007.
These three projects represent the beginning of a new era on Koh Samui as developers look for attractive, high-end alternatives to large-scale housing developments. In years to come, the strap line for the island’s property market may become ‘the condo is king’.