New Reports Names The Philippines as the Strongest Luxury Residential Market in Asia
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.
Hong Kong saw an 11.3% drop in sales in September, which contributed to a 0.5% fall in luxury residential prices, according to Knight Frank. Hong Kong saw its first decline in property prices since December 2009, with a reported 1.7% decline month on month.
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.
Vietnam’s overall economic outlook remaining negative according to Colliers International, who also recorded an average 2% decline in apartment prices. For those aiming to enter the luxury property sector should note that the country’s future economy is in unstable due to a budget and trade deficit, shortage of capital, high interest rates, inflation, foreign debts and currency depreciation.
The International Monetary Fund (IMF) has warned that China – which has the world’s leading property market – may experience a turbulent future if Beijing does not encourage financial institutions to extend more savings options to households. The country saw a decrease in growth quarter on quarter when compared to the 1st two quarters of 2011, according to Knight Frank.
Interestingly, it appears that the prices of luxury apartment have peaked in Singapore, with the average price per square foot dropping by 2%. Savills reported that 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.
Weathering better than most other Asian countries, luxury accommodation in the Philippines has remained resilient in Q3 2011, with Colliers International stating that secondary market prices for both CBDs are virtually equal at an average of P106,000 per square metre. On average, capital values have increase by P125,300 per sq. m from the formerly stable rate established throughout the previous 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.
In a conflicting report by Colliers International, Singapore rents saw a drop for the second consecutive quarter. The company reported an average drop in monthly gross rents of 0.7% to $5.74 per sq ft in luxury/super-luxury apartments.
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.
However the Philippines, and Makati CBD in particular, has seen an 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 the Asian Luxury Property sector, it seems that investors have been more careful in Q3 2011, with shrinking mortgage lending and mounting interest rates affecting demand in many Asian markets. Declining sales in usually strong markets such as Singapore, China and Hong Kong have been received with varied reactions, with certain areas in the Philippines remaining resilient amid the fluctuating world economy.
Factors such as mortgage and lending restrictions have affected the growth of price appreciation in a number of Asian markets, which has had a negative effect of property prices. Economic growth in Asia Pacific slowed in Q2 according to figures reported by CBRE as a direct effect of the impact of natural disasters that occurred earlier in 2011.
Although many external factors have contributed to a decrease in property investment in Asia, the luxury market in the Philippines has remained stable, with locations such as Manila and Makati commanding high rents. Growing CBD and the cities themselves has contributed to strong capital growth, which has now been endorsed by some of the world’s most sought-after 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.. This article, New Reports Names The Philippines as the Strongest Luxury Residential Market in Asia has free reprint rights.
January 15, 2012 | Posted by Sophie Baker
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