We hear a great deal these days about the collapse of the Eurozone, high unemployment in Spain and political turmoil in Italy; Greece, Portugal and Ireland on the verge of bankruptcy and so on. We're also led to believe that property values in these countries, Spain in particular, have taken a nosedive as a result and prices are now a fraction of what they used to be. Don’t believe a word of it! Choice property (not the hundreds of half-finished townhomes that were built several kilometers from the beach in desert landscapes that people were lulled into buying during the boom times) in popular destinations are still considerably more expensive than their Phuket counterparts. Try a well-known realtor in Spain, Viva Estates, and search their 'reduced property' section and compare. One typical example: A 170 sqm 2-bedroom ground floor condo with no sea view in Estepona, recently reduced from 750,000 Euro to 550,000 Euro. That’s reduced to 22.5 million baht! For 19.5 million baht we can offer a 210 sqm condo with fantastic sea views, only 100 metres from Kata beach.

Clients sometimes ask me why property in Phuket is so expensive. To be quite frank, I wonder where they're coming from. Phuket is SE Asia’s premier island resort. Compare it with, say, Majorca which is one of Europe’s most desirable island resorts and the difference is still greater. Take balearic-properties.com, just one agent with more than 200 properties for sale over 1 million Euros with the most expensive at 18.5 million Euros. Here are two comparisons of similar quality and locations:

Majorca: A modernist luxury villa in Son Vida of 745 sqm built up area in a 3,850 sqm plot. 6 bedrooms and 5 bathrooms. Super views of the bay. Price: 10 million Euros or 410 million baht.

Phuket: A magnificent modernist villa overlooking Nai Thon. 1,480 sqm built up area on a 3,210 sqm plot. 6 bedrooms, 8 bathrooms. Super views of the bay. Price: US$ 6.45 million or 193 million baht.

I could give many more examples but you can check for yourself. The other big difference between the Spanish resorts and Phuket is the amount of property available for sale. Our clients are often shocked to find out how little is available in the price and locations they want. Go to the Costa del Sol and you’ll be shocked how much there is for sale. So why do people still imagine that property is expensive on Phuket yet cheap in Spain? Perhaps they think labour costs are much cheaper here − and in this one respect they're partly right. Basic labour is cheap by European standards, but for the professionals − architects, engineers, surveyors and project managers − there's no difference. Materials are no cheaper; in fact most imported materials are more expensive here. There's a greater availability of land on Phuket, but prime plots are now very difficult to find and for most people prohibitively expensive. Phuket has a huge global market to aim at, whereas Spain and the rest of southern Europe is still largely dominated by British, German, Dutch and Scandinavian buyers, though as everywhere else Russian buyers are having their impact.

Another comment I often hear from clients is that they remember coming here 10 years ago when property was cheap. The reality is that 10 years ago there was virtually no high quality property for sale on Phuket. In fact, property prices have changed little since 2007, while the cost of land and construction has increased. Take into consideration all the above and I believe that, once the recession is deemed to be over, we're in for an unprecendented boom here. I know there are those who will think I'm attempting to hype up the market, but I really am basing my statement on the facts.
An explosion in demand from the fastest growing economies in the world within a five-hour flight, the eventual recovery of the traditional markets of Europe, a shortage of high quality property and an island for which prime land to build upon is running out. Demand will outstrip supply, confidence will return and, after several years of doom and gloom, people will want to spend again. There's plenty of money around, but there are just a lot of people who are afraid to spend it at the moment. Only last week I was having dinner with two friends, one of whose prime concern was where he could put his money and sleep soundly. I put this question to a senior banker client of mine in Singapore. This was just part of his reply:

“Your client is not alone; this was a common line of thought during the 2008 financial crisis − the 'more you have, the more you have to lose' scenario. Central banks have already started, and will continue, to crank up the printing presses to inject cash into slowing economies, resulting in the debasement of currencies. Metals will become a store of value, monetisation reversing back to where we were before paper money. There's not a single currency which people are currently happy to be holding in the present global uncertainty. Name any one and I'll give you a variety of reasons why you shouldn't hold it. Also, as interest rates are so low (and look like staying that way for some time) there's no incentive to hold deposits in cash. Globally, governments are looking for more creative ways to take cash away from the population, including greater policing of cross-border transactions, more stringent tax collection and higher direct/indirect taxes.”

He futher went on to say “In my eyes all the above are leading to greater diversification of asset portfolios, away from traditional stores of value such as stocks and deposit accounts, into assets which will still have a value even when a currency is debased, ie fine wines, works of art, precious metals and... property. My view is that this situation will continue for some time.”

So there you have it in a nutshell. And thanks Simon for your contribution.

David Wade is a Director of Tropical Homes Real Estate with offices in Kata Beach and Laguna Tel: 081 787 1108, 081 808 8896. Email: david@tropical-homes.net