Utopia Dream – Investment Overview May 2020
In this review we are going to look at this Hotel Room passive investment with its benefits, drawbacks and also some market comparisons of comparable projects in South East Asia in relation to price and investment returns.
Overview of Project
A high quality project from a high quality Developer in Phuket. This is the follow up to their first project UTN1 which sold out and already there has been a large up take even in Covid-19 Times.
The Project is of One Bed Units and Villa units and is aimed at both the investor market and personal lifestyle market, The Condo one bed units are between 24 to 40 Square Meters aimed at the investor market and villas are very much aimed at the Lifestyle market.
The Developer is a Chinese Australian company and is well established in Phuket as both a Developer and constructor. However, the major attraction of this Developer is they are one of the very few who are paying all their rental guarantees today in Covid-19 times, if they can pay their Rental Guarantee now they should be able to pay it in the future should something else bad happen in Thailand or the world.
Utopia Dream is situated in Naiharn close to Rawai beach in the South of the Island. Both Tourists and Lifestyle buyers like this area as it’s not as built up as other areas of the Island such as Patong or Kathu. With the success of the first project the Developer knows there is a great demand for this location.
Market comparisons based on Price per Square Meter.
The project is being sold at $3600.00 USD per square meter which is below the price of its competitors which are around $4000.00 USD per square meter and above. However, as an investor at this time the other projects should not interest you due to the fact those Developers are not paying their Guarantees and therefore for us in Phuket this is the best deal at the best price per square meter available. If you’re a lifestyle buyer not worried about income from your asset, then you have the whole market to pick from but even then on price per square meter this holds up very well.
If you’re an investor the only real negative you would take from the project is the guaranteed return of 8% PA guaranteed for 5 years and 100% buy back is not the best returns on the market. You also have to factor in withholding tax of 15%. This brings down your actual return to 6.8% which is still good but there are better returns out there.
The actual Negative above can also be a positive in that for cautious investors 6.8% for a real guarantee which will likely always be paid is a very good return. Much better return than the banks
The lifestyle part of the project of 10 to 30 days’ free usage in the resort is also a positive as some developers in Thailand do not give free usage.
The Developer also offers Cash Back for Cash buyers during construction of 8% PA
The project is high quality from a proven Developer at a price below most of its competitors offering a rental guarantee.
Gray Stuart Investment Review Score
As a series we will be reviewing several Developments and Projects like this and will be scoring then out of 100 using the same following factors for each review
Developer – Score 20
As stipulated above the Development team is extremely strong and had the actual development company that is paying its rental guarantee now. Any Developer doing that having a proven track record gets a maximum score from me.
Returns and Capital Growth – Score 18
This is very hard to score because the Guarantee is lower than other projects generally 6.8% net compared with 10% for some other projects. However, this is a real guarantee that is always likely to be paid. But as it’s not the highest our score of 18 reflects that
Country Performance – Score 18
Thailand is a great place to be and is relatively easy place to do business once you understand their rules especially about bringing money in and taking money out. Taxes are very clear and are not at the high end. The only tax you will pay is the 15% on rental income.
Security, Risk and Exit Strategy – Score 20
We covered this above I would say for all three you have to give a maximum score. Security is as strong as you need it to be. Risk there basically isn’t any and Exit strategy is there with 100% Developer buy back after 5 years.
Market Price and Value for Money – Score 17
Very strong project at a very competitive price and good value for money especially in Phuket but when we compare it with projects in other SE Asia countries like Indonesia and Philippines you get better value for money there. As they say everything is a price for a reason.
TOTAL SCORE 93% – This score is likely to be one our highest scoring developments in the series.
From an Investment point of view for risk adverse investors this is quite simply one of the best investments in the world. Where else can you get 6.8% on your money close to a bank style security. With this investment you also have the real estate asset to secure your investment.
If you’re a Lifestyle investor and buying this for the personal usage aspect of the deal, then the choice of country becomes very important. So if you don’t want to spend your holidays in Thailand you should pick an investment in Bali or Philippines or whatever place you would like to use your benefit in kind.
The return is about 35% less than can be achieved elsewhere but those projects may not have the proven track record of this Developer. At Gray Stuart we have other projects with higher returns but not in Thailand. In essence it’s about your perceived risk and what suits you best.
So just to recap want the best passive investment in Thailand with next to no risk this is the best deal on the market at the time of writing this blog.
Should you wish to find more about this project and receive the investment brochure please feel free to reach out to one of the Gray Stuart Thailand team or Myself.