Resilient luxury condominium segment

The luxury condominium market is making a comeback.

Latest data from Colliers Philippines revealed that the luxury condominium market rebounded in the first nine months of 2022. During the period, the luxury segment (P8 million and above) accounted for 28 percent of total condominium take-up, up from -1.6 percent in the first nine months of 2021 (indicating net back outs).

Resilient segments

Take-up as of end September this year was driven by projects located in major central business districts (CBDs) such as Fort Bonifacio and Ortigas. Colliers believes that the luxury and ultra luxury segments will likely remain resilient amid the rising interest and mortgage rates.

Overall, pre-selling condominium take-up reached 6,100 units in the third quarter, up from 5,700 units sold in the second quarter. This brings a total take-up of 14,900 units in 9M 2022, already outpacing full-year 2021 figures.

In 2021, we recorded anemic take-up in the pre-selling market with only about 12,400 units sold. Colliers believes that residential demand should be supported by improving consumer and business sentiment in Metro Manila.

Headwinds

Colliers sees the rising interest rates as among the headwinds in the residential market, especially their potential impact on mortgage rates.

Despite higher interest rates, Colliers has seen a stable demand for upscale to ultra luxury condominium projects in Metro Manila. Over the past few years, we have also seen a healthy level of price increases for these residential projects.

In fact, on a per square meter basis, Metro Manila’s luxury and ultra luxury condominium prices are starting to catch up with the region’s most expensive.

Colliers Philippines believes that the increase in prices will only result in investors and end-users looking for greater amenities as well as innovative facilities.

Due to Metro Manila traffic, there will be greater demand for connectivity to masterplanned communities and topnotch concierge services. With more luxury and ultra luxury projects being launched in Metro Manila, Colliers Philippines sees the rise of more discerning buyers.

Hence, developers need to further innovate and differentiate in a highly competitive luxury residential segment.

Room for price expansion

At present, the Philippines’ most expensive is at P495,000 per sqm. Based on regional prices, it appears that there is still room for further expansion of Metro Manila prices on a per sqm basis. We are barely scratching the surface.

The price per sqm of Metro Manila’s most expensive is cheaper compared to the most expensive condominium units in more affluent cities such as New York (10.5 times more expensive than Metro Manila’s most expensive), London (11.6 times) and in Hong Kong (23 times!).

Strong fundamentals

Overall, we are optimistic with the Philippines’ strong macroeconomic fundamentals.

The Philippine economy continues to expand despite soaring commodity prices and global geopolitical headwinds. The country remains one of the fastest growing economies in the region, primarily backed by resilient personal consumption and private investments.

Colliers believes that sustained recovery is likely to benefit major economic sectors including property development. The luxury and ultra luxury condominium segments showed resilience during the pandemic.

Hence, it won’t be startling to see these developments proliferating in the near to medium term as the Philippines recovers from the pandemic.

The luxury and ultra luxury projects are also likely to benefit from the reopening of Philippine tourism and the return of foreign employees.

Affluent investors are likely to continue buying luxury units as they upgrade, bank on potential price appreciation, and look for a viable hedge against inflation.