Philippines Named as Top Asian Location for Luxury Residential Property Investment
A November CBRE report noted a lull in Asia’s luxury residential property market in Q3 2011, citing the continual recovery for the USA’s economy and the debate about the state of the Eurozone as factors contributing to the slowdown.
In particular, countries which have seen a rising demand for accommodation in expanding cities and CBDs, have led to a number of international investors searching for properties in China, Hong Kong, Singapore, Vietnam and the Philippines.
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.
Closely watched by investors, Vietnam’s emerging property market saw a quieter Q3 2011 when compared to the previous quarter, indicating a decrease in property transactions. Property and land prices saw a drop in a number of areas, with housing prices in the incomplete Highway 32 seeing a decline of 15% – 20% in value.
Colliers International noted 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.
Although China has the world’s leading housing sector, the International Monetary Fund (IMF) has advised that the Chinese property market bubble could burst if Beijing does not encourage financial organisations to provide more savings choices for households. According to Knight Frank, growth quarter on quarter was slower than H1 2011.
Prices of luxury apartments in Singapore appear to have peaked in Singapore, with a reported 2% decrease in cost per square foot. Overall the luxury property sector has seen a 0.4% dip in the super luxury sector, with Savills warning that the sector may continue to remain unstable due to dwindling sales 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.
Despite this report, Colliers International stated that luxury/super-luxury apartment rents saw a significant decline for the second consecutive quarter. Monthly gross rents in the luxury sector in the country saw a 0.7% to $5.74.
Equally, Hong Kong’s luxury residential prices tapered off significantly in Q3 2011, with a slight growth of 0.6% QoQ to HK$19,629 per square foot as of August 2011.
Luxury rental rates in Makati CBD in the Philippines increased by 1.6% to P569 per sq m monthly, with a forecasted P600 per sq level in the next 13 months according to Colliers International.
Across the Asian Luxury Property sector, it appears that buyers and investors have been more cautious in Q3 2011, with tightening mortgage lending and rising interest rates affecting demand in many Asian markets. Declining sales in conventionally sturdy markets such as Singapore, China and Hong Kong have been received with mixed responses, with certain areas in the Philippines remaining resilient 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.
A number of external factors have contributed to a decrease in property investment in Asia. According to a number of sources, the luxury market in the Philippines has remained stable, with locations such as Manila and Makati commanding high rents. Expanding CBD and the cities themselves has contributed to strong capital growth, which has now been endorsed by some of the world’s most desirable brands such as Trump, Paris Hilton and luxury designer brand Versace.
To find out more about luxury property investment in the Philippines, read more on our exclusive Asia Property Blog.
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