The global impact of the sub-prime problem in the US is starting to be felt in Thailand's resort market, with with some foreign property buyers in Hua Hin either backing out or adopting a wait-and-see position, says Cobby Leathers, the sales and marketing director of Red Lotus.
The Sansiri Plc subsidiary, which mainly focuses on developing inland villas and not seashore condominiums, a niche reservesd for its parent company, has seen a decline in the buying power of Europeans since late last year and expects it to continue in the first half of this year.
Also while Sansiri's Hua Hin condominium sales, which mainly attract Thai buyers, are continuing, Mr Leathers expects these too will be affected to some extent by sluggish Thai economic growth.
Red Lotus is responding by offering some discounts and introducing new products that will provide more options to buyers. ''So we will kind of weather the storm,'' he says.
It is significant that this is the first time an established company has moved into a segment of the market that has so far been dominated by low-key Thai and foreign developers offering houses and villas at very reasonable prices but mostly without sea views, being farther inland and often up on the hills.
''You can buy them for 1-2 million baht (houses from less-established developers) but don't expect any good design,'' says Mr Leathers. ''Also be careful of the management long-term. Will the developer stick around, who has control of the management?''
Other advantages of buying from a major developer are that buyers are assured the company is financially sound and there is a high chance that the whole project will be sold. ''I have seen a lot of complaints that people are sitting on a construction site for years because [the developer] can't sell, I think it's a big issue, it would scare me if I were a buyer.''
It is because Red Lotus can assure buyers on these points that it is able to charge more for its three current projects _ Busaba pool villas, Sida tropical villas and Maya townhomes _ with prices ranging from 3.4 million to 9 million baht and the cheapest being a 22-square-wah townhome.
''They are all in the same neighbourhood and it's kind of an expat neighbourhood because there are existing developments there,'' says Mr Leathers. ''Before we entered the market there were Dutch, British and some Scandinavians already living there. You have some hill views yes, no ocean views, but it's five minutes from the beach and five minutes from the city.''
While the foreign buyers are mainly end-users, Mr Leathers said some people had bought several units in order to rent them out to holidaymakers and others seeking short- and long-term stays.
However, it is well-known that resort properties are often only able to attract short-term tenants with durations usually from three to six months.
''You can get year-long tenants but it's not like Bangkok of course, where there are expat businesses to support it, but you do have people in the hotel industry and some of the services professions that are getting bigger in Hua Hin. Or they hire expat workers or some of the freelance workers, people who work from home; I see them renting long-term as well.
''But in general it's not as constant as Bangkok rental tenants. These are more holidaymakers so you will get from daily and weekends up to weekly and two-week up to one-month rentals.''
In general Hua Hin tends to attract buyers straight from northern Europe, with Red Lotus getting a lot of Britons and Scandinavians, and not the regional expatriates who mainly drift toward Phuket, Samui and Pattaya because of easier access. But Mr Leathers has been surprised that some of the latter do see the value and appreciate the charm of Hua Hin.
As Thailand's oldest seaside resort, Hua Hin already has a name and the Thai government does a lot to promote it. ''A lot of people know about it. ... It's really picking up in terms of golfing, the golfers have known about it for years, there are eight courses now and a few under way. Major hotels have been there for years.''
In fact, what some might call a ''Greater Hua Hin'' is emerging with more resort development to the north in Cha-am, the home of Boathouse Hua Hin and Charn Issara Plc's Baan Charn Thalay resorts.
To the south, Pranburi has seen some niche developments and Red Lotus is keeping an eye on the market there. Sansiri itself was the pioneer in the shift beyond Hua Hin, offering condominiums 15 minutes away at Khao Tao. Bangkok Post.