Yau’s confidence was driven by upbeat forecasts and recent economic performance. In 2022, the Philippines logged 7.6 per cent economic growth, the third fastest in Southeast Asia after Malaysia’s 8.7 per cent and Vietnam’s 8 per cent expansion, according to official data. This year the Philippines is estimated to grow by 6 per cent, and a 6.2 per cent expansion is the forecast for next year, making it the second fastest growing country in the region after Vietnam’s 6.5 per cent and 6.8 per cent, according to the Asian Development Bank.Hongkongers, among the most prolific international property investors, have been driven to new markets after rising interest rates in the city, as well as sluggish sales of homes in the secondary market, made domestic investments unattractive. Yau is not the only Hongkonger seeking value in the Philippines property market. One Makati-based developer reported that units sold to Hongkongers in the year to date numbered over six times the annual tally for 2022.
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“From the time we opened our office here in Hong Kong in 2014, the historical average sales growth here was 5 per cent every year,” said Elvie Gumboc, president for sales at AyalaLand International, the holding company of Avida Land, which built the flats that are now owned by Yau.
This contrasts with a tepid home market. Data published earlier this month showed property transactions in Hong Kong slid to a four-month low in May as developers slowed down new launches amid weaker buying sentiment following several rounds of interest-rate increases.
Hong Kong property price levels are on average the second-most expensive in the Asia-Pacific region and despite falling 15 per cent in 2022 from a year ago, an average home cost of US$1.16 million makes Hong Kong property among the least affordable globally.
In contrast, Philippines property remains attractively priced. Median home prices in Metro Manila and Metro Cebu at US$181,058 and US$141,270 respectively are lower than those for Ho Chi Minh City and Hanoi which are currently at US$296,063 and US$182,290 respectively, according to data from the Urban Land Institute.
Other markets in the region are also pricey. Bangkok’s 98 Wireless project, sells units for about US$21,000 per square metre versus the estimated US$15,000 per square metre price tag for the upscale Banyan Tree Residences in Manila, according to data from Colliers Philippines.
Gumboc was in Hong Kong earlier this month to pitch investment ideas to prospective homebuyers. Such marketing events have already generated sales of more than 135 million pesos (US$2.43 million) this month alone, according to Marites Bancod, country manager for AyalaLand International Marketing (Hong Kong). This compares with sales of 266.8 million pesos to Hong Kong based buyers in all of 2022.
“We see (flat) prices growing by 2 to 3 per cent every year from 2023 to 2025,” said Joey Bondoc, associate director, research at Colliers Philippines. “Note that prices corrected by a combined 19 per cent from 2020 to 2021. The demand for [rental properties] is recovering as expatriates and local employees return to traditional offices.”
The successful launch of the Banyan Tree Residences brand was a sign that increasingly property developments targeted the luxury and ultra-luxury segments.
“We also see foreign interest especially for developable parcels of land outside Metro Manila,” said Bondoc. “We are seeing demand from Japanese investors looking to partner with local players with sizeable parcels of developable land in Pampanga, Bulacan, Cavite, Batangas, and even Cebu.”
Still, investors are facing risks stemming from funding costs, with the average interest rates in the Philippines at 6.25 per cent among the highest in the region. Thailand’s cash rate stands at 2 per cent, while Vietnam’s at 4.5 per cent and Malaysia’s benchmark rate at 3 per cent.
“Due to high interest and inflation rates we are seeing a tempered demand for condominium projects in Metro Manila,” said Bondoc. “We are also seeing subdued launches from developers as some investors are delaying purchase of new units given the high mortgage rates. Investors and end users are waiting for rates to stabilise or drop. But this scenario is unlikely for the remainder of 2023 unless we see aggressive interest rate cuts from the central bank.”
For this year, about 28,000 flats are expected to be completed, “which were mainly projects that were launched back in 2018 and 2019,” said Fredrick Rara, senior research manager at KMC Savills. In the next five years, 34,000 units are likely to be completed.
“We are not expecting the scale of residential launches to return to pre-pandemic levels in the next year,” he said.
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