Phuket, Thailand's largest island, has had three exceptionally tough years as Covid 19 wreaked havoc, slashing international visitor numbers. One of Thailand's most popular tourist destinations, an estimated 80% of the island's economy stems directly or indirectly from the tourism and travel sectors. Around 300,000 jobs were also connected to this industry.
Thailand welcomed nearly 40 million international visitors in 2019, a far cry from 6.7 million in 2020 and less than half a million in 2021. In three tumultuous years, the landscape has changed dramatically. We explore some influencing factors and their impact on the Phuket property market.
Pre-Covid
Pre-pandemic, Chinese tourists represented the most significant number of Phuket's (and Thailand's) international visitor market, while Russia was Thailand's seventh-largest tourism market, with 1.48 million visitors.
The introduction of the 'Sandbox' in July 2021 saw a slow increase in international arrivals, including Russians. However, Russian visitor numbers plummeted following Russia's invasion of Ukraine in February 2022 and the suspension of flights. As the Russian Ruble crashed, a 'cash only' policy applied by tourism operators further inhibited spending.
Post Covid
In October 2022, Thailand opened its doors to international tourists, regardless of vaccination status, aiding the flailing tourism and hospitality sector. As a spin-off, the property market has also seen some growth in interest and sales.
Thailand's tourism numbers have by no means recovered. In 2022 approximately 10 million people visited Thailand, according to TAT, around one-quarter of the number of visitors pre-Covid. By November 2022, Russia moved to the third largest market behind Malaysia and India. China's borders remained closed for out and inbound travel, only opened in January 2023.
Compared to other provinces, Phuket has fared well. Thailand Business News reports for the first ten months of 2022, Phuket Province had the highest tourism earnings and visitor numbers outside of Bangkok. In September 2022, Russian arrivals were 15,900, rising to almost 168,000 for November and December 2022.
The market mix continues to change, though. As of 1 January 2023, Indian travellers returning from Thailand must now produce a negative Covid 19 test, dampening Indian traveller numbers to Thailand. On the upside, with China re-opening its borders, a flood of Chinese are expected to visit Thailand and Phuket across 2023. While the Tourist Authority of Thailand predicts over 1,000,000 Russian tourists for the same period.
Russian and Thai Relations - What is the Impact?
Another aiding factor for Thailand could be its neutral position in the Russian and Ukrainian conflict. Plus, Russia is one of 64 Visa Exempt countries, allowing 30 days stay, extended to a possible 45 days from 1 October 2022.
With the addition of direct flights from Russia to Thailand by airlines including Ikar, Aeroflot, Siberia, Azur, and Ural, and departures from various locations across Russia, travel to Thailand has been made easy.
Additionally, in foreign exchange terms, the Russian Ruble is currently favourable against the Thai Baht, making Thailand highly attractive to Russian visitors. According to Forbes, the Ruble was one of the best-performing currencies against the USD in 2022, even after Russia invaded Ukraine.
Russians, as do many people from Central Europe, love the Kingdom's warm climate, with Phuket's great location and convenient international airport an added bonus. Whilst many stay for a few weeks, a trend towards renting or buying and staying for an extended period is playing out.
Some Russians contemplating work in Phuket may benefit from the upsurge of visitors from their country, as hospitality operators may need Russian-speaking staff. Online working is also possible due to Thailand's good internet. Schools are also seeing an uptake in enrollments, as are English as a Second Language (ESL) programs for children.
Property Market Impact
The Phuket property market, especially condominiums, was directly affected by the pandemic, becoming very sluggish. Developers chose not to launch any new projects in 2021, instead focussing on selling current stock whilst the situation played out.
At the end of 2021, 20,376 condominiums were sold out of a total supply of 26,068 units. Almost 90 per cent of new units were sold to mostly Russians, some European and Chinese buyers, with Thai nationals filling in the remaining demand. Most of these were in projects where owners could enjoy annual holidays in their Phuket condo and place it into the rental pool for other times of the year, deriving rental income. A Bangkok Post article indicates that Russians were the top nationality making condo transfers for Q1 2022.
As Thailand's visitor numbers increase, with TAT hoping for 20 million for 2023, the property sector is also warming up, with new stock coming to the market. Although it's early days, and with many factors at play, the Phuket property market is expected to continue strengthening. Though Russian nationals are active currently, which nationality will rise to the top in the coming year is hard to predict.
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