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Market Surge Sparks Money Laundering Fears

  • 1 month ago
  • Blog
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Aerial view of Phuket's luxury real estate along the coastline, highlighting the recent property boom.

Phuket’s real estate market has experienced a significant surge in prices, driven by increasing demand from foreign nationals. However, this boom has also raised concerns about potential money laundering activities.

Key Takeaways

  • Real estate prices in Phuket have risen by 15-20% in recent years.
  • The influx of affluent foreign buyers, particularly Russians, is a major factor.
  • Authorities are concerned about potential money laundering and other illegal activities.

Rising Real Estate Prices

Over the past couple of years, real estate prices in Phuket have risen by 15-20%, coinciding with the growing trend of demand from foreign nationals. Maetapong Upatising, president of Phuket’s Real Estate Association, attributes this surge to several factors. For instance, after the Russian-Ukraine war began, Phuket has seen an influx of affluent Russians opting to invest in villas and condominiums. Additionally, Phuket’s many amenities, including international schools, good transport infrastructure, a deep-sea port for yachts, and a golf course, are attracting wealthy foreigners.

This demand has been met by local developers and major players, resulting in escalating land prices across the island. Land in some areas of the island has seen particularly steep increases, rising from 3 million baht per rai to about 9 million baht per rai. Meanwhile, land along the beach has risen to 40 million baht per rai, while prime spots like Patong see a single rai going for about 120 million baht.

Dominance of Russian Buyers

Nattha Kahapana, managing director of Knight Frank Thailand, admitted that Russian buyers dominate the market, having snapped up 40-60% of properties on sale, compared to 10-15% previously. This has resulted in a 15-20% uptick in real estate prices.

Prakaipet Meechusan, head of Phuket Real Estate Trading Department, CBRE Thailand, highlighted a sustained growth in the villa and condominium market post-Covid, adding that luxury projects have done particularly well. “Most buyers purchase luxury residences in Phuket primarily for investment purposes, with 79% purchasing for rental income. The remaining 21% buy real estate for personal use, either as a vacation home or a second residence,” Prakaipet said.

Concerns Over Money Laundering

Amid this real estate boom, the Department of Special Investigation (DSI) has raised concerns that foreigners may be buying property to cover criminal activities, such as:

  • Falsely pushing up property prices
  • Avoiding taxes in their home countries
  • Using properties as fronts for criminal syndicates
  • Shifting funds from illegal sources for laundering purposes
  • Holding clandestine gatherings of foreign criminals, who often disguise themselves as tourists
  • Covertly integrating digital currencies within the framework of currency exchange businesses

Impact on Local Population

As authorities grapple with these challenges, homes in Phuket are fast becoming unaffordable for ordinary Thais. The rapid increase in property prices has made it difficult for local residents to purchase homes, exacerbating the issue of housing affordability on the island.

Sources

author avatar
Gaël Ovide-Etienne
Gaël oversees all marketing efforts for Ocean Worldwide. He manages marketing campaigns to connect with prospective buyers, conducts research and market analysis, and leverages AI to enhance all aspects of the business. This approach ensures better and faster results for our buyers and sellers.

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