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Phuket Real Estate Boom Raises Money Laundering Concerns

  • 4 weeks ago
  • Blog
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Aerial view of Phuket beachfront properties with construction cranes and blue waters, highlighting real estate boom.

The real estate market in Phuket has experienced a significant boom, with property prices rising by 15-20% over the past few years. This surge has attracted a large number of foreign investors, particularly from Russia, leading to suspicions of money laundering and other illegal activities.

Key Takeaways

  • Real estate prices in Phuket have increased by 15-20% in recent years.
  • A significant number of foreign investors, especially Russians, are buying properties in Phuket.
  • Authorities are concerned about potential money laundering and other illegal activities.

Surge in 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 Illegal Activities

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 business

Crackdown on Illegal Activities

Police in Phuket have charged more than 100 people, including 67 Russians, suspected of breaking business laws in a crackdown on the multi-million-dollar property sector. The tourism ministry reported that 767,210 Russians arrived in Thailand in the first four months of the year, with many heading to Phuket for its beaches and nightlife. Nearly 60,000 Russians are currently living in Phuket.

Police said the government called for a crackdown in response to complaints from Phuket residents about a land and residential grab by foreigners causing hardship. Raids last month resulted in a list of 135 people and 100 companies suspected of breaking the law. None of the suspects had been detained, but they had been summoned to appear in Bangkok to hear charges of breaking business laws.

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, driven by foreign investment, has made it difficult for local residents to purchase homes. This has led to growing resentment among the local population, who feel that foreigners are taking jobs and opportunities without proper work visas and business permits.

Conclusion

The real estate boom in Phuket has brought significant economic benefits to the island, but it has also raised serious concerns about money laundering and other illegal activities. As authorities continue to crack down on these activities, it remains to be seen how the market will be affected and whether local residents will be able to afford homes in the future.

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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