Avoiding the Gold Rush Greed, Bankman-Fried & Co Phuket Trap

Fires Don’t Burn Forever

Recently my young daughter has developed a habit of mimicking an Alicia Keys song ‘Girl on Fire’ but actually replaces ‘Girl’ with amusing substitutions to suit circumstances. Whilst boarding a plane, my little girl actually sings (much to our concern regarding our potential removal from the plane) and quite loudly, with laughter “This plane is on fire-eeeeeeeh.”

It is with that tune playing in the background of my mind that I write about Phuket’s real estate and supporting economy, a place dear to my heart, a market that is critical to business and survival but nevertheless is better stable and solid than boom and bust.

“This Phuket is on fire-eeeeeeeeh”. Yes, the real estate market does indeed appear to be on fire, for now. Inevitably, some are destined to be burnt.

This ‘gold rush’ feel to Phuket inspires deep within me a healthy sense of cynicism, caution and foreboding about what might or is likely to happen next.

Spiralling Rents / Migrant Influx

Russian nationals have understandably increased in number of visits and relocations to Phuket, naturally accepting the benefits the Thai authorities have offered in relation to visas and working arrangements. New families and residents naturally put pressure on poorly prepared infrastructure, such as roads, whilst monies inevitably find their way into the local and national economy. Landlords have seized the moment and increased rents greatly, resulting in a squeeze on existing tenant budgets, movements and downgrades for some existing tenants and departures for others who were operating on the thin line of economic sustainability. Russian nationals have suffered from this greed and have had to pay excessively high premiums for lodgings previously offered at far lower rates. Culturally, as evidenced extensively in the allegedly controversial works of Douglas Murray (see: The Strange Death of Europe, Bloomsbury), large waves of migrants will disrupt a culture and cause gaps of understanding and practice between existing habitants and new arrivals based on different behavioural norms. If a system is not equipped to allow adjustments to be made, conflict and unhappiness can result but can also dissipate, over time. Murmurings, complaints and rumblings exist in Phuket along the race-driven lines of ‘There are too many Russians’, whose existence actually adds to the continuing vibrant mix of Phuket’s demographic constitution. Phuket has rarely ‘stood still’ in its mix of arrivals and residents and that is overall fortunate in terms of its economic prosperity.

Cowboys, Cowgirls and Leopards with the Same Spots

Developers who have ‘developed in other countries’ but some of whom do not appear to know much about development of property in Thailand, have appeared and in some cases ‘re-appeared’. One case in point involved one our clients’ recently and clearly ‘falling in love’ (cue drone shot of bare land with violin music) with the design and concept of an unbuilt unit. The developer, identifying this emotion, proceeded not to co-operate with disclosures on due diligence, led a merry dance on contract amendments, indicating agreement on some changes and, suspiciously, in an email sent at Friday night cocktail hour announced, “no amendments would be entertained at all even after having been discussed before”’. Agreeing to register a lease during the building phase and then, at the last minute, shamelessly withdrawing that agreement and… threatening to confiscate the buyer’s deposit.

Lovestruck clients dropped all standards and professional perception skills, swiftly signing on the dotted line and mysteriously dismissing paid-for advice. The developer’s actions being the kind of behaviour that Sadia Khan, the British Psychologist living in Dubai (@sadiapsychology), might attribute to childhood trauma issues leading to the inability to be kind or tell the truth in a real estate development and sales context.

Slag Rises to the Top (molten by-product slag that is)

Some ‘businesspeople’ notably absent during the COVID years have re-emerged, with polished stories of their renewed interest in the future of Thailand and their desired role to play in it, provided they get a commission or benefit from those choosing to invest their monies here. Suddenly, stolen deposits, broken contracts, illegal land and illegal construction, hindered access rights and fraudulent documents are forgotten whilst said market participants dry clean their white upscale beach club outfits and play ‘false friend’ games at dinner parties and school children gatherings to inspire short term trust to loosen up the purse strings. Many ecosystems need parasites to clean up the ‘waste’, and certainly there is a class or type of investor intent on wasting their monies for the benefit of the parasites.

Do Prospective Phuket Investors Absorb and Apply the Global News?

Not everybody is a student of the past bubble eras, perhaps generationally ignorant of the South Sea Bubble, the fallout of the California Goldrush or forgetful of the Dot Com Boom (and Bust) eras. Some may have been very young or even unborn at the time of the 1997 Asian Economic Crisis, distracted at the time of the credit default swap driven 2008 Global Economic Crisis or intently watching Depp v Heard when global states were delving deep into their reserves to prop up economies following the COVID crisis.

However, it would take a strong effort in indifference to the news, albeit with great cortisol management outcomes, to be unaware of the FTX and the Sam Bankman-Freid Fraud Fiasco (alliteration bonus, thank you!). SBF is now a convicted fraudster, just like Bernie Madoff – who managed to persuade investors to fund trades to the tune of 50 billion USD (!) which he and his investment fund actually never made at all. Personally, I struggle to borrow small beans money from local banks, but then honesty is apparently not a determining criteria in raising funds. If I were in debt to the tune of 40 billion USD, perhaps it would be easier to get the extra 10 billion.

And yet, even whilst we still keep witnessing the seemingly impossible – duping ‘astute’ CEOs and CFOs, ‘C-Suites’ (always makes me think of old Apple Computers for some reason), Investment Fund Managers and financial regulators, none of this appears to be perceived as relevant in the tropical sunshine and rainy seasons of Phuket. Oh no, different natural laws appear to apply here.