International real estate investment in Phuket has been significant for decades and just keeps growing. Such is one of the effects of mass tourism – lots of people equates to lots of money which creates a situation where many want to get a piece of the pie. While the COVID-19 pandemic resulted in a slight speed bump for the island’s real estate market, it’s safe to say it’s recovered. Actually, it’s more than recovered, it has been experiencing unprecedented growth. 

For a good example of a real estate bubble, one need look no further than the 2008 sub-prime mortgage fiasco experienced by the United States. In general terms, a property bubble occurs when prices are inflated beyond their market value due to some extenuating circumstance. This could be something like lax regulation for obtaining a mortgage (what happened in the US), excessive speculation, or a spike in demand. Since the majority of buyers of Phuket properties in recent years are foreigners who are largely buying outright in cash, the effects of mortgages on the market are minimal or non-existent. This leaves speculation and demand being the primary drivers of the island’s market at the moment. 

There’s no question about it, and it’s quite obvious to anyone who takes a passing glance, that Russians and investors from other Eastern European countries make up the lion’s share of buyers currently. While there may be a variety of reasons for this, one likely scenario is the increased restrictions and difficulties in Western investment due to the Russia-Ukraine conflict. Regardless, a huge portion of the newly constructed condos and villas are being bought up by this demographic. 

So it seems that Phuket is technically experiencing a property bubble as a result of a spike in speculative buyers. Now the situation prompts several questions: Will property values slowly normalize at the current levels? How much bigger will the bubble grow until it bursts? If it bursts soon, how bad will the crash be? Sadly, nobody has the answers to those questions otherwise that would be very valuable information. The property industry can be difficult to predict, and in a unique market like Phuket, there are simply too many socio-economic and political variables involved for anyone to confidently predict. Perhaps one with a keen knowledge of the local market could attempt predictions with slightly better confidence under the most stable of conditions. However, there is much uncertainty surrounding factors that will influence the industry such as the Russia-Ukraine conflict. 

One variable that may apply some downward force on the island’s surging property values is the looming oversupply issue. At this moment there are tens of thousands of new condos, townhouses, and villas under construction. It’s a distinct possibility that there won’t be enough buyers willing to buy in at the currently inflated prices. However, that being said, an oversized portion of those who have invested in Phuket properties in the last few years are likely to hold onto their investments longer term. They are a group that predominantly bought properties outright and probably won’t be in a position where they need to sell at a loss.