December 2011
Philippine Luxury Residential Market Review
Based on Q3 2011 comparison of luxury property investments in Asia

Luxury accommodation in the Philippines has weathered the global economic crisis well, secondary market prices for both CBDs are virtually equal at an average of P106,000 per sq. m. Capital values have risen by an average of P125,300 per sq. m from the formerly stable rate established in the last 5 consecutive quarters.

Despite the slowing of property values, rental returns in some areas of Asia have increased, with a 1% rise noted in the Asia Luxury Rental Index. Contrary to the report, Singapore rents saw a drop for the second consecutive quarter. Average monthly gross rents of luxury/super-luxury apartments registered a drop of 0.7% to $5.74 per sq ft, as of 3Q 2011. According to a November CBRE report, both national and international investment in Asia’s luxury residential property market slowed in Q3 2011, due to the on-going recovery of the United States economy and the continual debate about the strength of the Eurozone. In recent years the luxury residential markets in China, Hong Kong, Singapore, Vietnam and the Philippines have attracted overseas investment because of the high demand for accommodation in ever-expanding cities and CBDs. In some locations, capital appreciation saw its first decline in 3 years, with the Asia Luxury Residential Property Index weakening by 0.2% in Q3.

In Hong Kong sales decreased by 11.3% in September according to Knight Frank, with luxury residential prices falling by 0.5%. In terms of luxury rents, Hong Kong’s luxury homes fell by 1.7% month on month, the first fall since December 2009. Vietnam’s emerging property market has been closely watched by investors however, Q3/2011 was quieter than the previous quarter showing a decrease in successful transactions. Both land prices and property prices in some areas showed a drop in price, with housing projects located along the incomplete Highway 32 seeing a drop of 15% - 20% value compared to the previous quarter. An average 2% decrease in the price of apartments in Vietnam, with the overall economic outlook remaining negative. Investors looking to enter the luxury market should be aware that the future of the economy is at risk of a budget and trade deficit, shortage of capital, high interest rates, inflation, foreign debts and currency depreciation.
Despite the fact that China has the world’s largest housing market, the International Monetary Fund (IMF) has warned that the Chinese property market could overheat if Beijing does not encourage financial institutions to extend more savings options to households. Growth quarter on quarter was slower than in the first two quarters of 2011. Interestingly, it appears that the prices of luxury apartment have peaked in Singapore, with the average price per square foot dropping by 2%. Super luxury segment decreased by 0.4% in Q3, with the company warning that the sector remains unstable due to poor sales of luxury accommodation for two months in a row.

Luxury accommodation in the Philippines has weathered the global economic crisis well, with Colliers International stating that secondary market prices for both CBDs are virtually equal at an average of P106,000 per sq. m. Capital values have risen by an average of P125,300 per sq. m from the formerly stable rate established in the last 5 consecutive quarters. Despite the slowing of property values, rental returns in some areas of Asia have increased, with a 1% rise noted in the Asia Luxury Rental Index.

Contrary to the report, Singapore rents saw a drop for the second consecutive quarter. Colliers International stated that average monthly gross rents of luxury/super-luxury apartments registered a drop of 0.7% to $5.74 per sq ft, as of 3Q 2011. Similarly, the growth of luxury residential prices tapered off significantly in Q3 2011 in Hong Kong, with a mild growth of 0.6% QoQ to HK$19,629 per sq ft as of August 2011. Faring well, luxury rental rates in Makati CBD in the Philippines increased by 1.6% to P569 per sq m monthly, with Colliers International forecasting that this number will continue to rise to the P600 per sq level in the next 13 months.

Overall it seems that buyer and investors have been more cautious in Q3 2011, with tightening mortgage lending and rising interest rates impacting on the demand in many Asian markets. Slowing sales in traditionally strong markets such as Singapore, China and Hong Kong have been received with mixed reactions, with selected locations in the Philippines remaining strong amid the fluctuating world economy.

It appears that price appreciation has slowed in many Asian markets, indicating that mortgage and lending restrictions have had a negative effect on property prices. Economic growth in Asia Pacific slowed in Q2 according to CBRE, due to the impact of natural disasters that occurred earlier in the year, which has further contributed to a decrease in investment in the Asian property market. Despite these outside factors, the Philippines have shown that luxury property investment can remain successful, with locations such as Manila and Makati commanding high rents. The continual development of CBD and the cities themselves have helped add strong capital growth to the luxury property market, which has now attracted endorsement from some of the world’s most sought-after brands such as Trump, Paris Hilton and more notably Versace.


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