Why PH developers aren’t building new luxury condos

MANILA, Philippines (CORRECTED) – Property developers appear to be refraining from launching new luxury residential projects in the country, according to a recent market report by CBRE Philippines.

While demand is present, CBRE noted that “developers have been cautious in launching luxury developments because of longer construction period and slower returns.”

However, capital values of luxury properties have increased 2.4% quarter-on-quarter, due to limited supply in the market.

Rental values have also been stable, as some prefer renting high-end residential properties instead of luxury properties. High-end properties have lower rental rates and comparable amenities to that of luxury developments, CBRE said.

Luxury residential condominiums average P240,000 to P250,000 in Makati central business district; P230,000 to P250,000 in Rockwell Center; and P200,000 to P220,000 in Bonifacio Global City.

CBRE pointed out that there are only two luxury residential condominiums in Metro Manila — the Grand Hyatt Residences and Discovery Primea — that are presently selling.

Demand for luxury condominiums are driven by expatriates, high-income individuals and foreign investors.

“Foreign investors are also investing in luxury residential properties as the country offers lower prices than most Asian countries. The average price of currently marketing luxury projects in the country is at $457 (around P20,000) per square feet, which is significantly lower than the regional average of $1,143 (around P50,000),” CBRE said.

Affordable, mid-market projects

Major developers are now focusing efforts on affordable and mid-market residential condominiums, CBRE said. This segment accounts for more than 80% of the total units for completion from 2013 to 2019.

Many high-density residential complexes are sprouting up near business districts, as more Filipinos opt to live in a condo as opposed to buying a house and lot outside of Metro Manila.

The demand for affordable and mid-market condos is being driven by OFWs and a growing middle class.

“With investor confidence solidified, it is anticipated that the demand for residential properties will continue to pick up in the coming quarters,” CBRE said. –Cathy Rose A. Garcia, ABS-CBNnews.com