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Why luxury condo prices continue to soar in PHL

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PLANNING to get a luxury condominium anytime soon?

Better snap it up quick, as surging demand for posh digs in central business districts is pushing prices higher and higher.

“Property prices all-time high and you see that from Bonifacio all the way to El Nido [Palawan],” David Leechiu, chief executive officer of Leechiu Property Consultants (LPC) noted during the company’s media briefing in Makati City on March 18.

In general, Mr. Leechiu noted prices for the residential sector have risen 20% to 25% from 12 months ago.

As of first quarter of 2019, residential condominiums are commanding prices as high as P540,000 per square meter (sq.m.) in the case of Horizon Homes at Shangri-La at the Fort in Taguig, and P533,000 per sq.m. for The Estate Makati

Developed by Shang Properties, Horizon Homes is a collection of 98 luxury units within the Shangri-La at the Fort complex. The Estate Makati, on the other hand, is a ultra-luxury residential condo project being built by SM Development Corp. and Federal Land.




Demand for these high-end condos is being driven not just by wealthy Filipinos, but also Chinese buyers and investors, according to Mr. Leechiu.

Broken down, investors account for 35% of the demand, followed by professionals at 30%, overseas Filipino workers (OFW) at 20%, while foreigners at 15% of the demand.

Of the foreign buyers, the Chinese market accounted for 35% of the demand.

“There is a surge in Mainland Chinese buyers in the residential condominium sector and we anticipate for this to continue for the long term especially with rekindled ties between Philippines and China,” LPC said in its report.

Mr. Leechiu also noted that three property developers, namely DMCI Homes, Ayala Land, Inc. and SM Development Corp., have said that a chunk of their residential sales are attributed to Mainland Chinese buyers.

This trend is seen to continue this year pushing prices even higher.

“It will just keep driving prices higher… We anticipate new records to be broken this year and next year,” Mr. Leechiu said.

But he believes the rising prices will not necessarily hurt local buyers.

“Yes, we look at how expensive it is now but remember how many millionaires, billionaires are being created because of China investing here. I know so many people who have been trying to sell their property for year they couldn’t sell, then all of a sudden the Chinese nationals come here, increase the value of the property and all of a sudden they went from very poor to being millionaires overnight,” Mr. Leechiu told BusinessWorld.

Meanwhile, land values also saw an increase during the first quarter of 2019 with the highest rate at Bonifacio Global City at P1.3 million per sq.m.

“This is a direct result of the Philippines opening up to foreign direct investments abroad,” Mr. Leechiu noted during the briefing.

Specifically, the demand is mainly driven by Information Technology and Business Process Management (IT-BPM) companies returning to the Philippines.

According to LPC, the IT-BPM sector accounted for 432,000 sq.m. of the total 1.2 sq.m. office space in 2018, up from 358,000 sq.m. of the 775,000 sq.m. for 2017. As of first quarter of 2019, the IT-BPM companies occupy 102,000 sq.m. of the 187,000 sq.m. available.

In the regions, the sector also accounted for the biggest demand for office space at 78% or 13,000 sq.m. of the 17,000 sq.m. available, which are mostly in Davao (6,000 sq.m.).

“Philippines office supply will grow by 34% in the next five years. The unprecedented level of developments outside of Metro Manila is expected to add 1.23 million sq.m. to its current supply of 2.08 million,” LPC noted in the report.

Although, this growth may be challenged by the delays in Philippines Economic Zone Authority (PEZA) approvals for 387,958 sq.m. of space. IT-BPM firms prefer to open offices in PEZA-accredited buildings to secure incentives.

Currently, there are only 216,000 sq.m. of PEZA accredited spaces in the Metro Manila versus the perceived demand from the IT-BPM companies at 450,000 sq.m.

“PEZA spaces would be more scarce, therefore prices would climb faster. If we are anticipating non-PEZA spaces to grow 15%, maybe they will grow 20% in the PEZA buildings,” Mr. Leechiu said. — Vincent Mariel P. Galang

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