Interview with Martin Phillips

07 October 2007

How did you come to be in Phuket?
I’d been living in Singapore for 15 years and the company I was working for restructured, so I decided to take a break from corporate life and think about what I was going to do. I didn’t want to go back into the corporate mould and wanted to do something different. We’d been looking at property in Phuket and Bali. Every time we came up here we realised that it was quite difficult to find an agent who knew what was going on in the market – it was all very fragmented. A friend of mine had joined Engel & Volkers as CEO for the UK and I asked him, "why don’t you go and open some offices in Phuket and we’ll share that," and he said "I don’t have this in my territory, but I’ll fix an appointment for you to go and talk to E&V in Hamburg." I began to research the company and we arranged to see them on December 29th, which was three days after the tsunami happened in Phuket. We’d spent the prior month here doing due diligence on the markets in Phuket, Bangkok, KL and Singapore.

The discussions went on and they came over to look at Asia, as it wasn’t really on their radar at the time. We ended up discussing a South East Asia contract rather than a Phuket contract or a Thailand contract. This led to us getting the master licence for Singapore, Malaysia, Indonesia, Vietnam, the Philippines and Thailand, and at that point we had to decide what our entry strategy was going to be into the market. Part of the expansion is owner-operator, or we franchise it. The only way to really understand the business was to do it ourselves. We looked at doing it in Singapore, but the commissions were very low – around 1%, and they were also quite low in Malaysia. In Thailand, there were better commission rates, so we decided on doing an entry strategy here at the expense of the other countries and we would run the business ourselves from day one. The basis of that was to give us the confidence and the knowledge to go and talk to other partners about how to run the business.

We set up in Phuket as we didn’t want to go into Bangkok. We’d be eaten alive: it was too huge, we didn’t have the local knowledge and we wouldn’t have been playing to our initial strength, which is the brand recognition amongst wealthy European’s. We opened up here because this was the premium market and we are a premium brand. We then opened in Hua Hin through a franchise and are now starting our expansion in Bangkok, as people are beginning to know us up there now and we know the formula for establishing a sub-market strategy. We go into the sub-markets such as Thonglor, Ekamai, Sala Daeng, Silom, Sathorn and we establish local offices in each of those areas that develop their own expertise in listing primary and secondary residential properties.

What kind of niche do you think you fill?
Luxury is where we’ve made our name, but we also do good mid-range products as well. We don’t touch the low end at all.

Do you have markedly different competitors in Bangkok to Phuket?
You’ve got more established players in Bangkok than you have here. Obviously, there are the big guys that we respect, like CBRE, JLL and Knight Frank, also some local players such as Harrison, but we don’t consider that we are competing directly in that space because we work principally on a sub-market strategy through a property shop concept. I don’t think anyone’s seen the kind of approach in Thailand that we bring over from Europe – the design of the shops, the way the staff members get trained, the systems that we operate. We take referrals from all around the world and make referrals out – we’ve sold properties in Dubai from this shop, for example. It’s a different strategy. The point is that you can’t tackle the Bangkok market by just having one single office and thinking that you know exactly what is happening in all the key residential markets, particularly when it comes to resales.

How much business do you get from international referrals?
Less than 10%, but referrals form quite a big part of our lead basis. It takes some time to convert a lead into a sale anyway – up to a year. 70% of our leads come from the internet through the websites that we operate. The remaining 20% is through direct contact or through people coming in to the shop. We’re also drawing leads now from the airport because we recently opened an office there in international arrivals.

Are you interested in sole representation contracts?
We’ve deliberately avoided that for the moment because of the economic and political situation, which has created a downturn in the property market. It would be unfair for a developer to put all their eggs in one basket. It probably wouldn’t do us any good at all because it would come down to performance and if we couldn’t perform to the expectations of the developer it would be in neither parties interest. If the market picks up later, we’d probably do some selective sole representation. In Hua Hin we do it and it’s been very successful – we have five projects there that are entirely exclusive and those are going quite well.

How important is the middle-market?
We have wealthy clients, but we also have a good band of mid-range clients that are looking at houses that are around US$750,000. The middle market is an extension of the luxury market in that people recognise they are dealing with an agency that handles with the luxury end anyway, which means they are going to receive excellent service for mid-range products. We don’t take everything on in the mid-range – only product that we believe is well priced and has good quality associated with it. The mid-range market is the bread and butter at the moment – some of the good developments that at $750,000 – $1 million are within the general affordability of a lot of our clients and that’s the type of product we tend to show the most. At the very high end, there’s an absence of good properties. There are probably a dozen properties on the market in the super-high end at the moment and it comes down to personal choice. People who are looking to spend $4-5 million on a property generally have some idea of where they want to be and what they want their home to look like. Even if there’s nothing available that fits they are not likely to compromise their position.

Are you less reliant on Hong Kong buyers than other agencies?
Very much so, I think Hong Kong is an important market, but compared to Europe it’s a much smaller market and we are able leverage the other offices in for referrals because we have 300 worldwide. People generally have good relationships with their own client bases in Europe and the clients are quite loyal insomuch as they will come to Engel & Volkers and say, "Do you have an office in Thailand?" That’s how we get a lot of referrals. We sell more properties to European’s than to Hong Kong buyers.

You’re currently advertising through Bloomberg TV also?
Yes, we’re currently working on the expansion – licensing and franchising awareness. We’re running that campaign over into direct property sales for Thailand in October and November. We were probably the first to advertise Thailand properties on TV. Tamarind Hills advertised on the BBC, but I think we did Samui first. We were doing a project called Shambala and were running the ads on behalf of them, but we’ve since withdrawn from that project.

Are you considering a Bali office?
We have Bali oin our sights but we haven’t looked intensively at it just yet. It’s probably the second most important resort home market in Asia. The reason we haven’t looked hard is because we haven’t had the resources to delve into the legal set up there. We need to make sure that franchise is compliant to Indonesian laws, that’s already been done here and in Singapore. If we can establish in those two market’s first, it’s going to be relatively easy for us to go over and work in Malaysia and Indonesia. Singapore will be the next step and we are in discussion with partners at the moment.

What’s your view of the Singapore market?
You can always trust in the Singapore government – they’ll always come good even if there are some bumps along the way. The property market there is driven by overseas investors, although I’m sure local businesses people are taking are also playing the market. There’s a lot of talk about integrated resorts and how that’s going to help Singapore. There’s also a lot of excitement about how the population is going to grow with a finite amount of space on the island. These people have to live somewhere, the chances are they will be well-educated, well-informed, wealthy people and that’s driving the market. In my personal opinion, the market’s probably a little bit toppish at the moment. I don’t know quite what factor will drive a correction in the future, but I’m sure there will be one at some stage.

Would you look for a niche there?
Yes, we would only deal in landed property and we would not be in the HDB section of the condominium market. We wouldn’t do any new project launches at this moment in time, because that’s reasonably specialised – we’d focus on the secondary market. We estimate there’s room to open eight shops across Singapore, which we would award on an individual licence basis.

Is there a secondary market in Phuket now?
Yes. It’s a natural progression with all the development going on. In fact, a lot of our product is resale product there. It suits a lot of people who don’t want to wait for something to be constructed and are not prepared to buy off-plan because there’s a certain element of risk, no matter how small. They want to see what they are going to buy and feel at home in it and that’s a good market for us.

Why did you choose to locate your office in Kamala, as opposed to more popular agency locations on the island?
We chose Kamala because it’s on a main arterial road, so we get exposure, but it also positioned us close to "Millionaire’s Row" and we were comfortably close to Surin and Laguna. We chose not to go into Cherng Talay because it was too crowded. We are a company that stands out from the crowd and does something a bit different. We looked at Surin, but finding suitable office space was difficult. There’s a shortage of good commercial space in good locations on Phuket – you’ve almost got to build your own. We’ll probably open another two or three offices on the island as we expand. I hope to move towards Laguna and perhaps do something a little bit different there. We’d also go central and south. That would gives us a network of sub-markets – I don’t think you can run Phuket from just one office.

Source: Property Report