Metro Manila’s luxury condominium market is making a comeback.
Latest data from Colliers Philippines reveal that demand in the luxury condominium segment rebounded in 2022. During the period, luxury units (P8 million and above) accounted for 34 percent of total take-up, up from only 5 percent in 2022. Take-up in 2022 was driven by projects located in major central business districts (CBDs) such as Fort Bonifacio, Bay Area and Ortigas.
Colliers believes that the luxury and ultra-luxury segments will likely remain resilient despite rising interest and mortgage rates. In our view, the continued improvement of Metro Manila’s infrastructure backbone will also play a crucial role in lifting the prices of condominium projects across the capital region, particularly the luxury and ultra-luxury units. Increasing land values and prices of construction materials may further compel developers to launch more high-priced residential units.
Colliers thus projects an aggressive launch of luxury projects in the CBDs as well as Metro Manila outskirts.
Market-dictated shift to luxury
Major developers’ recent residential launches primarily cater to the affluent market. In 2022, about a third of newly-launched units are classified as upscale to ultra-luxury. In our view, investors prefer these luxury units due to capital appreciation potential. These projects are also regarded as a viable hedge against inflation.
Gradual recovery in Philippine economy
Colliers Philippines believes that the improving business and consumer sentiment should further propel take-up and positively influence prices across the capital region. We see a gradual price recovery starting 2023 which should offset corrections in the market caused by an unfavorable economic situation in 2020 and 2021.
Further test the market
In 2022, Colliers recorded the launch of 6,000 luxury and ultra-luxury units, representing 25 percent of total launches during the period. Some of the pre-selling projects’ contract prices (TCPs) range from P102 million to P149 million per unit. This would be equivalent to about P472,000 to P519,000 per sqm. These developments are definitely breaking the price barrier.
Upgrade amenities and concierge services
As more luxury and ultra-luxury projects are being launched in Metro Manila, Colliers sees the rise of more discerning buyers. Beyond capital appreciation potential, investors and end-users are enticed by upscale facilities, quality concierge services, and the perks of being in a masterplanned community. Colliers encourages developers to further innovate and differentiate their amenities to gain a competitive advantage in the thriving luxury residential segment.
Partnerships with foreign developers
Colliers Philippines believes that property firms should seize the opportunity provided by the growing popularity of joint venture (JV) residential projects across Metro Manila by firming up partnerships with foreign developers.
Property firms should emphasize the JV projects’ upscale amenities, integrated development features, and strong potential for capital appreciation, which are important considerations for a discerning and affluent market. Currently, joint venture projects between foreign and Philippine firms are among the more expensive in the market. Despite being classified as luxury and ultra-luxury, these projects have an average take-up of between 75 percent and 87 percent as of end-2022.
Luxury condominium segment resilient in 2022
Colliers saw a stable demand for luxury and ultra-luxury projects in Metro Manila. In 2022, these segments accounted for 34 percent of total condominium units sold in the pre-selling market, up from 5 percent in 2021. In our view, the luxury and ultra-luxury markets will likely remain resilient despite high interest rates.
The increasing price of construction materials is also prompting developers to focus on the higher end of the market. Data from the Philippine Statistics Authority (PSA) show that price growth of construction materials reached 8.3 percent in 2022, a 14-year high.
Room for price expansion
Over the past few years, we have seen healthy levels of price increases for luxury residential projects. 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.
At present, the Philippines’ most expensive is at P519,100 per sqm. Based on regional prices, it appears that there is still room for further expansion of Metro Manila prices on a per square meter basis.
Redefining Metro Manila market
Colliers Philippines believes that the demand for luxury and even ultra-luxury units will likely remain resilient.
In our view, developers should prepare to tap the demand for this segment. With prices breaking the P500,000 per sqm mark and TCPs of more than P100 million per unit, we see a market that will only become more discerning moving forward. Investors will definitely be on the lookout for more innovative amenities and facilities; better connectivity in masterplanned communities that provide open spaces, heath facilities and services, high quality office towers; and topnotch concierge services.
Moving forward, we are likely to see luxury and ultra-luxury projects even partnering with prominent personalities and brands. We see this becoming the norm in the luxury and ultra-luxury segments in Metro Manila.
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The article was originally published in Inquirer.NET and written by Joey Roi Bondoc.
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