TUESDAY, April 16, 2024

Phuket real estate boom sparks money laundering suspicions

Phuket real estate boom sparks money laundering suspicions

Phuket’s property market is experiencing an unwarranted surge in prices, prompting the Department of Special Investigation (DSI) to consider looking into the possibility of foreign mafia using real estate to launder money.

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, he said, after the Russian-Ukraine war began, Phuket has seen an influx of affluent Russians opting to invest in villas and condominiums. Also, he said, 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, he said, has been met by local developers and major players, which in turn has resulted 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.

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, he said, 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.

However, amid this real estate boom, the DSI has raised concerns that foreigners may be buying property to cover criminal activities, such as:

• Falsely pushing up property prices

• Avoid paying taxes in their home countries

• Using as a front 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.

Meanwhile, as authorities grapple with these challenges, homes in Phuket are fast becoming unaffordable for ordinary Thais.