Deducing true luxury
Luxury condominium demand is seen to remain strong as Metro Manila continues to have one of the most attractive rental yields in Asia; relatively lower prices compared to other luxury residential markets in the region; and a sustained demand from affluent Filipinos, foreign investors, and expatriates.
More affluent locals are seeing luxury condominium projects as a viable investment option aside from the stock market. The shift in lifestyle further encourages high end investors and end-users from posh villages to also embrace condominium living.
The luxury market in the country’s capital region is relatively small but demand has been stable over the past few years. The projects being leased out to or sold in the secondary market continue to receive strong demand. This entices affluent locals and foreign investors to look for similar developments in Metro Manila.
In fact, pent-up demand encourages mid-income condominium developers to scale up and construct luxury and ultra luxury projects in emerging business districts in the capital region.
From 2015 to 2018, Colliers recorded the launch of about 23,160 luxury units. The luxury segment, which represents condominium units priced over P8 million, has been clocking in sustained launches and take up.
Growth in luxury market
The luxury residential segment has been rising due to the lure of a bullish property market in the country, backed by stable macroeconomic fundamentals. Colliers has observed that prices have been growing by an average of 10 percent annually over the past five years. This is supported by high rental income potential of these properties.
Indicative of the growth in the luxury market is the re-emergence of large, three-bedroom condominium units. The Asian financial crisis compelled local developers to launch smaller cuts. But after the global financial crisis, developers posted encouraging take up of large condominium units and we still see this trend today.
In Metro Manila, the price per square meter of these projects range from nearly P200,000 to about P500,000. Most of the luxury and ultra-luxury projects are found in major business districts such as Makati, Rockwell Center, and Fort Bonifacio.
Outside of Metro Manila, we are seeing areas such as Cebu and Davao catching up in terms of prices. Aside from being property hotspots, the prices of residential units in these cities have risen due to the influx of foreign tourists and investors. A part of the demand is also coming from Metro Manila-based investors.
In Cebu, prices of luxury developments range from P223,000 per sqm to nearly P260,000 per sqm while those in Davao are around P145,000 per sqm to about P220,000 per sqm.
In terms of demand, luxury projects in Metro Manila, Cebu, and Davao recorded an average take up of 80 percent as of the third quarter of 2019.
Luxury market considerations
Aside from location, developer brand name is also important.
Discerning end-users and buyers should also consider the qualitatives, which include amenities and facilities. Among the common features of luxury residential developments are gyms with top-of the-line equipment; resort-like pools; spacious lounges; and function rooms where business executives can hold social or business gatherings. Popular designers and architects have been commissioned to handle luxury projects in Metro Manila and these interesting developments should further improve Metro Manila’s skyline.
Luxury three-bedroom condominium units in Cebu are enjoying high occupancy rates due to continuously growing interest in the city as a key investment destination. Much of the demand for prime units is attributed to high-ranking local and foreign executives employed by Cebu’s burgeoning outsourcing and industrial sectors.
High-spending foreign tourists and retirees also contribute to the sustained take up. Aside from their strategic locations, luxury condominiums in Cebu continue to enjoy high occupancies due to their hotel-like amenities and proximity to beach resorts and other tourist destinations.
We are also expecting prices in Davao to increase at a sustained pace due to the infrastructure investments in the region, which are seen to further improve its competitiveness as an investment hub. In our opinion, Davai City is likely to remain a residential hotspot even after the duration of the current administration.
Colliers has observed that some of the luxury projects in the market were developed from partnerships between local and foreign players. It believes that both local and foreign companies mutually benefit from joint venture projects.
While foreign firms are enticed by high yields derived from Philippine luxury projects, local developers can improve their brand image by partnering with prominent foreign brands known for their precision and high architectural and engineering standards, meeting the requirements of meticulous buyers expecting premium spaces from a luxury project.
