Something funny is going on in Pattaya, a Thai beach resort where funny things tend to happen.
Previously best known in the tourism industry for its sleazy nightlife, Pattaya is enjoying South-East Asia’s first second-homes property boom, and the buyers are primarily wealthy Europeans and Americans.
Last year, the resort sold more than 230 million dollars of beachside condominiums, mostly to foreign buyers.
Although modest by international standards, the construction boom – there are about 300 condominium and residential projects under way in the Pattaya neighbourhood – has already raised concerns about exacerbated water shortages and rising crime against foreigners.
And the boom is pricing locals out of the market.
“Four or five years ago, you could buy any condominium unit for about 30,000 to 35,000 dollars,” said Clayton Wade, managing director of the Premier Homes Real Estate Co and a longtime Pattaya resident. “They have all at least tripled. “
The prices are being ramped up by the dearth of reasonably priced vacation homes in the United States and Europe, a growing global market for beachside property and a lot of speculation, including some money- laundering activity.
“We’ve got plenty of monkey business in this town,” Wade conceded.
Similar housing booms are taking place at Thailand’s other beach resorts – Hua Hin, Samui and Phuket – and to a lesser degree in other South-East Asian destinations, notably on Indonesia’s Bali.
And the take-off in second-homes sales is not limited to South-East Asia.
Europeans are flocking to Croatia and Bulgaria to snap up Mediterranean villas that are cheaper than what’s on offer in Spain. Americans are going south to Mexico, Costa Rica, Panama, Nicaragua and Honduras in search of affordable getaways.
The global migration from the developed world has been unleashed by a number of factors. For starters, there are a lot more wealthy people in the wealthy countries, and much of this new wealth has been generated off property.
According to estimates by The Economist magazine, the value of residential property in developed countries increased by more than 30 trillion dollars from 2001 to 2005, an increase equivalent to 100 per cent of those countries’ gross domestic products.
The Economist’s dire prediction in 2005 that this property boom is the world’s biggest bubble that is about to kaboom has yet to be actualized. Instead, the bubble has spread to more remote shores.
“Globally, what’s happened now is there are a lot of people not just buying a second home but finding that investing in real estate makes money,” said David Simister, chairman of the real-estate company CBRE?Richard Ellis in Bangkok.