Best real estate in Thailand

Thailand leads the way on mixed-use residences, resorts cum rental villas . Imagine a vacation home that caters to desires for space and resort-style luxuries – private dining, personal spa treatments, butlers, boat charters and bottles of champagne.Imagine a vacation home that caters to desires for space and resort-style luxuries – private dining, personal spa treatments, butlers, boat charters and bottles of champagne. Imagine traveling to exotic locales to spend a month in a hassle-free house. Then imagine guaranteed returns on your investment, flexibility and brand-name association.

The allure is undeniable, and it has led to a rising trend in mixed-use residences, developments that incorporate more than one type of accommodation – a hotel and serviced apartments or a hotel and vacation club. The establishment in of these properties began back in the late 1980s, with the launch of the Amanpuri in Phuket. Laguna entered the fold soon after with villas and apartments, and the Banyan Tree, the Sheraton and the Allamanda Vacation Club have since boosted the trend.

The reasons for the rise in mixed-use residences are varied; lifestyle changes, desire for travel and improvements in communication among them. “People like the idea of owning property in a number of attractive locations as well as the ability to choose from outright ownership and full-time residency to fractional ownership or even points-based vacation clubs,” said Daniel Collins of Infinity Hotel & Management Group, the managers of Tamarind Hills in Phuket. “The choices allow for various levels of financial commitment and return and offer options on owner usage.”

According to Bill Barnett, managing director of C9 Hotelworks, the trend is a sign of a change in buyers, many of whom possess excess cash. More buyers are investing in mixed-use properties as a second home or as part of an investment strategy rather than as a primary residence, he maintained, adding that for those types of buyers, branded hotel groups are an attractive investment.

“If you buy on the back of a brand, you’re assured worldwide distribution along with other brand benefits,” Barnett said. “Investing in mixed-use properties means you’re buying on fundamentals. “ Added pluses often include restaurants, spas, a concierge service and other luxuries that come along with being connected to a resort. “Common facilities tend to be better equipped and operated in mixed-use properties,” said Collins. “And in the case of investment-driven properties, professional management and marketing is a bonus.”

Mixed-use residences mean buyers can purchase an investment property that generates a yield both from asset appreciation and from rental income, Collins explained. Most also offer flexible usage programs of between 30 and 60 days a year with no black out dates – though usage can be restricted in investment-driven properties. Value can be added to a property by a strong brand or management company, while buying costs do not necessarily increase and often are tied to the level of service associated with the property.

Of course downsides exist. Management agreements on branded resorts do expire, says Barnett, who was recently involved in the sale of Crowne Plaza in Karon Beach to Kingdom Hotel Investments, now re-branded as Movenpick Resort and Residence. Selling of vacation points or fractional ownership may not be as easy as selling a whole property, notes Collins. And small returns of between five and seven percent, are not always guaranteed.

In general, however, the pros do seem to outweigh the cons, for both buyers and developers. Many developers are creating new projects in the mixed-use vein in order to spread their risk and get a better payback. “By selling part of their inventory, they are able to reduce the amount of capital they need, spread some of the risk and financial cost to others, and in some cases, generate profit up front rather than have to wait for rental income to pay back construction costs,” Collins said. From a Phuket perspective, mixed-use residences support a growing tourism industry. Because short-haul flights from nearby and Hong Kong are so affordable, says Barnett, usage rates for these properties are high, and unlike time-shares, usage dates are flexible.

Most rental villas offer a complete range of facilities, including restaurants and bars, spas, fitness centers and 24-hour concierge services. Others, however, take a more hands-off approach, with some offering only minimal services, allowing guests to devote time to their own leisure pursuits. “A lot of people don’t want to be tied to their hotel,” said Jeanette Kelly from Saboey Resort and Villas in Koh Samui. “If you’re staying some place for a long period, you don’t necessarily need all the comforts of a resort. And with people coming to visit for the whole of their six-week holiday, rental villas are a lot more cost effective than taking up a hotel for six weeks.”

Families in particular often prefer the privacy and availability of facilities that make these properties homier. There is the option of having a kitchen if you do want to cook and other amenities that are important for a family, Kelly said. With that idea in mind, many mixed-use residences are now promoting themselves as “lifestyle investment properties”. And according to Barnett, more and more hotel groups are coming in to manage these villa resorts.

“We’re optimistic that the market’s going to grow,” said Barnett. “Unlike Bangkok, Phuket is still a solid fundamental market. There is not a lot of building on spec, and most of these properties are being paid for with cash.” Collins shares the sentiment, stating his belief that more people will choose to buy mixed-use properties for the benefits of investment yields, professional management, flexibility and facilities.

This article was first published in Thailand Property Report November2006