Prospects For Pattaya  City - 2010 & Beyond

Pattaya's major expansion as a tourist resort started in the late 1990s and began its major boom in 2003, both as regards tourist arrivals and property development; the latter experiencing an annual growth rate of between 10% and 15% from 2004 to 2008. As regards tourism, however, following six consecutive years of growth, the tourist peak was reached in 2007 when 6.85 million visited the city-resort; an increase rate of almost one million visitors every two years over the previous five years. These were largely foreign, from Russia, China, S. Korea, Germany, Taiwan, Britain, India, the Middle East and the USA, in that order, followed by the largely national group, domestic Thais. “The strength of the destination, though, is not just about numbers. Much of Pattaya's allure is as a lifestyle destination due to the wide choice of upscale leisure activities that can be enjoyed throughout most of the year,” Raimon Land research asserted in 2007; a statement which will continue to be valid far into the future.

However, the worldwide economic recession and a series of domestic problems, which are still ongoing, resulted in a dramatic fall of 16% in the second half of 2008 that continued to erode tourist arrivals in Pattaya, with a drop in numbers by 22%, and a fall in tourist-related revenue of 35% in 2009, caused apparently because of lower spending per head and shorter stays. In 2010, the projected Tourist Authority of Thailand predictions for tourist arrivals for the whole of Thailand are expected to reach 14 million, but with the global economy still not robust and effect of the recent Red-Shirt protests, this figure will almost certainly be overly optimistic.

Nevertheless, after the previous disincentives of the PAD (Yellow Shirt) closure of the Bangkok Airports in 2008 and the first Red-Shirt protests resulting in the invasion of the Royal Cliff Resort during the ASEAN conference on April 10, 2009, the tourist numbers began to steadily climb and the 2009 high season saw yet another peak, with the majority of Pattaya  hotels experiencing 100% occupancy, giving a great deal of encouragement to local tourist and property-related businesses, until, that is, the Red Shirts began their civil disobedience campaign in March 2010 and so called ‘Democratic Revolution' in May, 2010. However, we can be confident that the government will soon restore order and people's memories are short and we can be assured that the tourists will soon begin once again to flock to Thailand in general and Pattaya in particular, just as they have always done in the past. The attractions of the country with its breathtaking scenery, equable climate, extremely well-developed hospitality industry and entertainments, medical facilities and among the lowest priced yet highest quality property markets in the whole SE Asian region will undoubtedly offset any negative publicity generated by the recent disturbances.   A more effective PR campaign by the Tourist Authority of Thailand and related ventures, however, may be necessary to dispel the international media-generated notion that the Red-Shirt disturbances were nationwide, whereas, with a few exceptions, they were confined to a few central areas of Bangkok.

Pattaya looked as though it was to become a city of skyscrapers until the recession put many on hold, though some of these are beginning to be developed again, like Reflections, W Tower and when large-scale capital investors are found, considerably more. However, for the immediate future, most of the sales will be of houses and the low-rise condominiums, particularly those of the "big four", namely the foreign developers Heights Holdings, the Iguana Group, the Nova Group and the largest local-based Thai developer, Ratanakorn Asset. It is considered by astute property analysts that the business plans of these four developers have winning potential, specifically quite large, relatively cheaply constructed low-rise condominiums, featuring a wide variety of modern facilities, in attractive but not overpriced locations, with the lowest priced units at around the affordable Bt1 million mark. These condominiums, being below the eight-storey limit, do not involve the intricate and time-consuming complexities of the environmental planning regulations that the high-rises face, hence building is rapid and ongoing sales, particularly off-plan due to the big four's excellent reputations in the Pattaya Property Market, are successful. This low-end of the market from Bt1-3 million is still well within the budgets of expats who might otherwise experience difficulties in the middle-range and top-end of the markets. The recent strengthening of the US economy, the Conservative-Liberal Democrat coalition government in the UK, which should allow the appreciation of the pound sterling, and if the EU manages to rescue the failing economies of Greece and Spain and thus restore international confidence in the Euro,on the one hand, and the continuing strengthening of the Chinese economy giving the impetus to the Asian economies, should do much to restore investor liquidity and bode well for the Pattaya Property Market in the near future.

Interestingly enough, Jugkarut Ruangratanakorn, Vice-President of Ratanakorn Asset, speaking at a seminar held by Real Estate Information Centre and reported in the 15.3.10 issue of the Bangkok Post, confidently predicted that Pattaya's real estate and tourism markets will expand by 5% and 10%, respectively this year, irrespective of the political situation, although he does acknowledge that the Pattaya Property Market will not rebound immediately because of these recent political disturbances, but will recover gradually through 2010. But he does expect solid growth from 2011 to 2014. This Jugkarut Ruangratanakorn essentially ascribes to the fact that the Pattaya Property Market is governed by a life-cycle. This cycle hit rock bottom between1997-2000, witnessing a marked recovery from 2001-04 and a definite boom from 2005-08, with an annual growth rate of between 10% and 15% during the boom period.

Despite the recent influx of domestic buyers from Bangkok, buoyed no doubt by last year's phenomenal real estate growth in the capital, which saw pre-sales of Bt15.1 billion, a growth rate of approximately 380% over the year, and 2,678 new condominium transfers, amounting to Bt21.5 billion, the Pattaya Property Market remains crucially dependent on foreign buyers, whose purchasing-power has been adversely affected by the strong baht and the weak pound, dollar and euro and the slow global economic recovery. As in Bangkok, where the long, well-established developers of high repute, like Sansiri, Asian Property and Noble, virtually cornered the whole of the off-sales market, to the detriment of the newcomers, the "big four" plus Raimon Land and a few more reputable developments, here in Pattaya,  have done much to restore the credibility of this highly profitable investment segment whose high-risk factor decreases with reputability.

In addition, there is a considerable oversupply on the condominium market, which some analysts maintain will require from three to six years to absorb, while property is overpriced and exceeds demand. Be this as it may, however, one prominent real estate agent and property  pundit, Clayton Wade of Premier Homes, with a firm command of the Pattaya Property Market gained over fourteen years, states categorically in the April 2010 issue of Homes & Condos that the resort-city also suffered from the same problem from the late 1990s to 2003 and again in 2005, but that they sold, nevertheless, and that he is supremely confident that  "sometime, within the coming 12 to 24 months, we will start another inflationary  property  development cycle here in Pattaya  and throughout the Eastern Seaboard," and that "whether we are in the midst of a fast selling property  boom or we are clearing out condo and house oversupply, Pattaya  is not going to stop building and developing for decades - not a chance."

As for the overpriced aspect of the Pattaya Property Market, which is a very valid criticism, supported by many in the field, Jugkarut Ruangratanakorn had this to say "If property prices rise by 20-25% a year on average for five consecutive years, an exit strategy should be applied. This is a sign to step back. Remember that risk management should be always done." This advice was intended essentially for investors but it is a sound clarion call that the developers themselves should heed and if they wish to clear surplus stocks and maintain a healthy balance sheet, they should be prepared to cut prices and accept short-term losses to guarantee long-term profitability. The same applies to the rental market, which is slowly beginning to recover; the high rents may have been sustainable when expat and multinational companies were prepared to pay generous housing allowances, but with many pull-outs of Thailand, actual or threatened, a diversification of clientele may be necessary in the future and rental price cut accordingly.

Finally, Jugkarut Ruangratanakorn had this advice for developers: they should develop their long-term competitiveness by building a strong product character, accumulating capital and prime land plots,which apparently accounts for 30-35% of development costs, expanding to other supporting businesses and establishing expertise in a specific product or market.

For all those involved in the Pattaya Property Market, whether developers, real estate agents or buyer investors, we can take heart that the fundamentals are strong, the foundations have been well laid and infrastructure is progressing steadily, but above all else the universal appeal of Thailand in general and Pattaya  in particular, though temporarily tarnished by the recent unrest, will soon, once again gleam, not forgetting the golden rule of property that if it doesn't sell immediately, you can always live in it or rent it out until a more auspicious time arrives. We can wholeheartedly concur with Jugkarut Ruangratanakorn's final statement "For Pattaya real estate, treasure is waiting ahead."