Manila Is the World's Top Luxury Real Estate Market, Says Report

Isn't it ironic that the Philippines is becoming more appreciative of luxury properties when many Filipinos still do not have their own homes? However, as this report from global property consultant Knight Frank reveals, Manila has become the fastest-growing high-end real estate market in the world, unseating Dubai. 

Manila recorded 26.3 percent of annual price gains in luxury residential properties last year, the highest of all 100 markets analyzed in the report. Dubai, previously the frontrunner, slipped to second place, with a price growth of 15.9 percent. The Bahamas followed with 15 percent; while the Algarve in Portugal and Cape Town in South Africa saw prices jumping by 12.3 percent, rounding up the top five.

Overall, luxury residential markets still came out a bit stronger than expected, even while facing significant headwinds like the nonstop interest rate hikes and the rising living costs globally. Across the 100 markets tracked by Knight Frank, 80 recorded flat or positive annual growth in 2023, with luxury prices going up by 3.1 percent on average. This was regarded as "a solid gain."

“Stock markets were heading for more pain; inflation was veering out of control; and the pandemic-fueled property boom was set to end in tears, as borrowing costs hit 15-year highs in some markets,” Kate Everett-Allen, head of international residential and country research at Knight Frank, said in the report. “However, that never happened. We’ve seen a much softer landing in terms of price performance around the world.”

The Asia-Pacific region emerged as the strongest-performing region across the globe, with annual luxury prices increasing by 3.8 percent. Joining Manila in the top five markets with rapidly growing price gains are Mumbai, Shanghai, Seoul, and Auckland. According to the report, the Asia-Pacific may be seeing more wealth than any other region in the years leading to 2028, with Chinese investors and the Japanese real estate at the forefront.

Knight Frank, headquartered in London, prides itself as one of the world's leading independent real estate consultancy firm. Through its yearly wealth report, it provides insights on prime property markets, global wealth distribution, threats and opportunities for wealth, commercial property investments, and luxury spending trends.

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Source: Esquire

PHL banks’ exposure to the real estate sector eases to 20%

The exposure of Philippine banks and trust entities to the property sector eased to 20.17% as of end-December last year, from 20.55% at end-September 2023, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Preliminary BSP data also showed this was lower than the 20.98% ratio at the end of December 2022.

Investments and loans extended by Philippine banks to the real estate sector increased by 4.3% to P3.15 trillion as of end-December from P3.02 trillion as of end-December 2022.

“This may have to do with the expanding base of total loans that mathematically led to a smaller share of real estate loans to total loans,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The ratio also eased amid the need for banks to comply with limits on real estate loans, investments, and other related exposures, as a matter of prudence to address concentration risks on the industry,” he added.

Central bank data showed that real estate loans rose by an annual 5.8% to P2.74 trillion as of end-December from P2.59 trillion as of December 2022.

Broken down, commercial real estate loans went up by an annual 5.5% to P1.73 trillion, while residential real estate loans increased by 6.7% to P1 trillion.

Meanwhile, past due real estate loans jumped by 2.4% to P135.261 billion.

This as past due commercial real estate loans rose by 4.4% to P39.987 billion, while past due residential real estate loans edged higher by 1.5% to P95.274 billion.

Gross nonperforming real estate loans inched up by 0.5% year on year to P108.389 billion.

This brought the gross nonperforming real estate loan ratio to 3.96% as of end-December from 4.17% as of end-2022.

Meanwhile, real estate investments in debt and equity securities declined by 5.9% to P410.653 billion in the period ending December 2023.

Mr. Ricafort also noted that higher borrowing costs may have reduced the demand for new real estate loans.

“Since real estate development and purchases by buyers require relatively larger amount of capital and financing, (it’s more) sensitive to higher interest rates.”

From May 2022 to October 2023, the central bank raised rates by a cumulative 450 basis points (bps) to bring the benchmark rate to a 17-year high of 6.5%.

The BSP monitors lenders’ exposure to the real estate industry as part of its mandate to guide financial stability.

In 2020, the central bank raised the real estate loan limit of banks to 25% of their total loan portfolio from 20% previously to free up additional liquidity as part of its relief measure during the pandemic.

Separate BSP data showed that housing prices rose at a slower pace in the fourth quarter of 2023. The Residential Real Estate Price Index rose by 6.5% in the fourth quarter, much slower than the 12.9% expansion in the third quarter and the 7.7% growth in the same period a year ago.

Source: Business World

PHL to attract int’l real estate investors, occupiers

The Philippines is emerging as an attractive destination for international real estate investors and occupiers, buoyed by its positive growth outlook, according to real estate services firm Cushman & Wakefield.

“Southeast Asia’s comparatively strong GDP (gross domestic product) forecast has made it a bright spot in the global economy,” Cushman & Wakefield’s Head of Global Occupier Services for Asia-Pacific Cameron Ahrens said in a statement last week.

The firm added that the growing acceptance of new working styles combined with the cost constraints of a higher interest rate environment bodes well for lower-cost and emerging markets in the region.

“Manila also has a booming office sector thanks to its significant proportion of shared service centers, or business process outsourcing offices,” Mr. Ahrens said.

Moody’s Analytics expects the Philippine economy to expand by 5.8% this year, driven by robust demand for electronics that could catalyze export growth across the Asia-Pacific region. The country is also projected to be the third-fastest-growing economy in the region for the year.

Mr. Ahrens noted that the higher interest rate environment and broader macroeconomic climate meant that global occupiers, including multinational companies, continued to take a cautious approach to costs.

“In the current environment, we are seeing companies take a more considered approach to expenditure, and this extends to expanding headcount. They are being very strategic about where they want to grow their headcount and where they want to grow their business,” he said.

He added that globally, shared service offices and global capability centers are expected to continue seeing growth as multinationals increasingly accept that remote working is both possible and sustainable.

“During and following the pandemic, the Great Resignation and the ensuing War for Talent helped to accelerate the growth of this practice as employers looked to new and often lower-cost markets to fill vacancies and grow their headcount,” he said.

“Manila’s deep, English-speaking talent pool and its established reputation as a business process outsourcing market positions it as a key beneficiary,” he added.

Although the region shows promise, Cushman & Wakefield highlighted lingering downside risks. These include reduced demand from China, a key export market for Southeast Asia; ongoing geopolitical tensions between China and the United States; and persistent albeit gradually improving inflation across the region.

Source: Business World