Luxury properties: Beyond investments

Luxury real estate holds a unique allure, embodying exclusivity, sophistication, attention to detail and enduring value.

In the ever evolving landscape of wealth creation, wealth accumulation and ultimately, wealth management, the savvy Filipino investors are increasingly turning their attention to luxury real estate as a strategic means of growing and more importantly, preserving their wealth.

The archipelago’s flourishing economy, coupled with a burgeoning market for opulent properties, presents a compelling case for those seeking to diversify their investment portfolios.

The allure of luxury real estate

Luxury real estate holds a unique allure, embodying exclusivity, sophistication, attention to detail and enduring value. In a country where economic growth has fueled a rise in high-net-worth individuals, the demand for prestigious properties in prime locations is on the rise. Manila, with its skyline adorned by upscale condominiums and exclusive subdivisions, is at the forefront of this trend.

While it’s true that the rich are getting richer, the influx of income-generating activities, the growth of the IT and business process management (IT-BPM) industry, and remote work opportunities continue to give Filipinos the opportunity to enjoy the finer things in life.

The Philippines’ growing population just created more demand for housing. It also gives our economy that “demographic sweet spot” which means we have a young, high-energy, and driven workforce for the foreseeable future.

All these contribute to the rising Filipino middle class, which just means we’ll have more families who are able to save, invest and go beyond investing by acquiring luxury properties.

Economic resilience and real estate

One key advantage of luxury real estate investing is its resilience in the face of economic fluctuations. High-end properties often maintain their value even during economic downturns, providing a stable anchor for an investor’s wealth. This stability is particularly attractive in a country like the Philippines, where the real estate market has demonstrated remarkable resilience in the face of various economic challenges.

Luxury properties, especially those in prime locations, offer the potential for substantial capital appreciation over time.

Come to think of it, regardless of the economic situation, whatever happens to the investments market, no matter how chaotic the political landscape is—we’ll always have a place to call our home.

Residential properties are the physical manifestation of life milestones. Commercial buildings are the physical manifestation of economic growth.

And you are seeing residential and commercial constructions coupled with government infrastructure projects left and right. You may be hearing about big ticket projects spanning years to complete. All these just contribute to the attractiveness of real estate because it will eventually ease vehicular congestion and bring efficiency to economic activities.

Capital appreciation and rental income

As more and more Filipinos begin to spend their money beyond investments, high-end real estate has been on top of their shopping list.

Luxury properties, especially those in prime locations, offer the potential for substantial capital appreciation over time. The limited supply of exclusive real estate in sought-after areas contributes to the appreciation of property values. Additionally, investors can leverage their assets by generating rental income from these properties, further enhancing their overall return on investment.

That’s the beauty of real estate—you need not sell the property for you to make money. You can keep ownership and receive steady stream of income from your tenants.

Mitigating risks and challenges

While luxury real estate offers enticing opportunities, investors must be mindful of potential risks and challenges. Market volatility, regulatory changes, and shifts in consumer preferences can impact the sector. Conducting thorough due diligence, staying informed about market trends, and enlisting the expertise of real estate professionals are essential steps in mitigating these risks.

While acquiring luxe real estate is expensive, its upkeep also requires some serious money.

One key advantage of luxury real estate investing is its resilience in the face of economic fluctuations. High-end properties often maintain their value even during economic downturns, providing a stable anchor for an investor’s wealth.

You have to remember that it goes above and beyond the regular property. They are sizeable, they are spacious, they have lots of features and amenities, plus they are exclusive. All these involve a hefty sum of money—you’re talking about lawn maintenance, pool cleaning, monthly association dues, among others.

Tax considerations and legal framework

Understanding the tax implications of luxury real estate transactions is crucial for effective wealth management. Investors must navigate the intricate web of tax regulations governing property transactions in the Philippines. Seeking advice from tax experts and legal professionals can help optimize investment strategies while ensuring compliance with relevant laws.

Real Property Tax is a given, but from a wealth management and preservation standpoint, luxury homeowners should already have Estate/Donor’s Tax considerations in check.

A wealth of opportunities

In the Philippines, luxury real estate investing stands as a compelling medium for wealth management. As the nation’s economy continues to flourish, high-end properties present a wealth of opportunities for investors seeking stability, capital appreciation, and a hedge against economic uncertainties. With prudent financial management, careful consideration, strategic planning, and a discerning eye for prime locations, luxury real estate can become a cornerstone of a robust wealth management strategy in the Philippine setting for years to come.

The pandemic effect

Despite the above-average price tag, demand for luxury real estate has increased dramatically because of people’s realizations during the pandemic. It influenced the way people think about living, living spaces, serenity and peace of mind.

While digital transformation expanded our reach, the lockdown measures forced us to confine pretty much all our activities indoors. We did not only live at home, we worked from home, our kids attended school from home, we worked out at home, we entertained ourselves at home, we tried to relax from home.

Residential properties are the physical manifestation of life milestones.

And all these things led people, intentionally or unintentionally, to pay a closer look at their homes. And this has never been more highlighted in the luxury segment.

In a high inflation and high mortgage rate environment, demand for luxury properties seems to be unaffected maybe–just maybe–because luxury properties go beyond investments.

The author, CIS, CSR, CTP, CUSP and CFMP, has 18 years of experience as an entrepreneur, real estate investor, stock broker, financial literacy advocate and public speaker. He is the vice president and head of Business Development and Market Education departments, as well as the OFW Desk, of First Metro Securities Brokerage Corporation. He also sits in Metrobank’s Financial Education Editorial Advisory Board. He may be reached via [email protected]

Luxury properties, especially those in prime locations, offer the potential for substantial capital appreciation over time. Luxury real estate holds a unique allure, embodying exclusivity, sophistication, attention to detail and enduring value.