View from the Top
Business World, 08-28-2013
ON TREND with the performance of the Philippine real estate
industry as a whole, prospects for the country's high-end and
luxury residential property markets, particularly the condominium
segments, are looking quite bright but not as bright as the
prospects for the middle end market.
"There is a very thin line between luxury and high-end
condominiums," said Angela Manese, residential sales and leasing
executive for KMC MAG Group, in an interview. She explained that
the terms are often used interchangeably, but a few characteristics
differentiate one from the other. For instance, luxury condominiums
usually have lower densities as opposed to high-end condominiums. A
luxury development would typically have anywhere from two to four
units per floor, while a high-end one would have closer to eight to
Furthermore, while both market segments typically have the same
type and quality of amenities, because of density, their difference
lies in the number of people who use them. "For example, there are
high-end developments that have huge amenity levels, but [the
amenities] are shared by about three towers," said Ms. Manese.
"Luxury developments, [on the other hand], have about the same
[amenities], but [these are] shared by one or two towers at
Despite these, however, high-end and luxury condominiums remain
very similar, with a clearer distinction existing between high-end
and middle end developments. Ms. Manese explained that for luxury
and high-end condominiums, unit cuts are usually at least 150
square meters, and can reach up to about 400 or 500 square meters.
Selling prices also fall within the same area, at about P190,000
per square meter.
According to KMC MAG Group consulting and research associate
Antton Nordberg, however, prices of luxury condominiums are also
more prone to fluctuation. "It's at least P190,000, but it can
reach around P300,000 to P400,000 [per square meter]," he said. Mr.
Nordberg also explained that given that the supply for high-end and
luxury condominiums is going to be limited, prices will most
probably continue to rise at the current rate of 6% to 9% per
annum. However, a high vacancy rate, especially in the high-end
market, could also keep the price increase at a moderate level.
In terms of residential rents, Colliers International reported
that in the last quarter of 2012, the average rent for luxury
three-bedroom units in the Makati central business district (CBD)
was at P720 per square meter per month, which would translate to a
monthly rent of about P180.000 for a 250 square meter unit. The
same report also noted that average rents in both the Makati CBD
and Bonifacio Global City (BGC) had been at parity since the second
quarter of 2012. Rockwell Center, on the other hand, remained the
most expensive area on a per square meter basis at P800 monthly.
The report also said that rents were expected to improve by more
than 6% in BGC and the Makati CBD, and by over 7% in Rockwell
Center by the end of 2013.
In the first half of this year, the high-end and luxury market
segments posted an increase in both capital values and rental
values, reflecting the positive performance of the local real
estate industry as a whole. "From 2009 to the first half of 2013,
the compound annual growth rate (CAGR) of inflation adjusted
selling prices of preselling luxury residential condominium
developments is estimated at around 8%, while the CAGR of capital
values of existing high-mid/luxury residential condominium
developments is estimated at around 3% within Metro Manila," said
Jones Lang LaSalle Philippines research, consulting, and valuation
advisory head Claro Cordero, Jr. in an Aug. 13 post on the Jones
Lang LaSalle blog. He added that growth of demand for residential
accommodations was driven by the steady growth of remittances from
overseas Filipino workers, as well as by the phenomenal growth of
the business process outsourcing industry.
The market for high-end and luxury condominiums is composed of a
good mix of local and foreign investors, expats, and other high
income individuals. The developments are usually located within
Metro Manila's three CBDs, and include Discovery Primea in Makati;
St. Francis ShangriLa and One ShangriLa Place in Ortigas; and
Essensa, Regent Parkway, Pacific Plaza, and the Grand Hyatt
Residences in Bonifacio Global City. The Rockwell Center in Makati
City also holds a number of high-end condominiums.
There are only about three high-end residential developments
under construction at the moment, but the middle end market, on the
other hand, seems to be flourishing.
"The market now is leaning toward middle end developments; the
middle income families are the major target since the volume is
there," said Ms. Manese. "Their purchasing power is also increasing
so this seems to be the current sweet spot for developers as shown
in the small number of high-end developments now and the
concentration on the middle end market."