By Luisa Maria Jacinta C. Jocson, Senior Reporter
THE PHILIPPINES’ top property developers are expected to boost the rollout of premium residential projects in the next few years, S&P Global Ratings said, amid weakening demand from the mass market.
“This trend toward premium sales should persist for the next one to two years,” it said in a report dated May 21.
“Wealthy homebuyers are less sensitive to inflation and interest-rate hikes. Inventory levels remain low in the premium segment, which accounts for about 5% of total inventory in Metro Manila,” it added.
The report focuses on the country’s four top developers — Ayala Land, Inc., Megaworld Corp., Robinsons Land Corp. and SM Prime Holdings, Inc. These developers account for 60% of market capitalization and total revenue among listed real estate companies in the country.
“These four were selected based on a sole criterion: that their market capitalization exceeds $1 billion,” S&P Global said.
It said these four real estate developers are “leading their sector out of a post-pandemic hangover.”
“The entities are pivoting to more high-end projects where demand has been resilient. While the firms’ leverage is higher than pre-pandemic, their presales are expanding. The investment positioning for growth should prove constructive, in our view.”
Demand for residential development has been soft, the debt watcher said. “Residential pre-sales of the top four were 17% below pre-pandemic levels as of 2024.”
It also cited key risks such as oversupply in the mass-market segment, a widening price gap between primary and secondary units and elevated mortgage rates compared with 2022.
“The composition of pre-sales has shifted notably,” S&P Global said. “High-end projects — those priced above P12 million per unit — now lead launches.”
High-end units accounted for 41% of launches in 2024 versus 20% in 2023, it said, citing Colliers International.
“This contrasts with markets such as Indonesia, where demand and sales mostly center on midrange housing,” it added.
Developers more exposed to the premium segment are seen to leverage the opportunities from these conditions. “The power of branding affiliation in the premium segment will also benefit established players.”
For example, Ayala Land and Megaworld derived more than 60% and 80% of their presales from upper-mid to high-end properties in 2024, respectively, it said.
It also noted that SM Prime and Robinsons Land are also moving toward the premium segment.
“That said, the rising number of premium-project launches is unlikely to significantly boost margins over the next two to three years,” S&P Global said. “The projects do have higher margins, but there is a lengthy lag between presales and revenue recognition.”
