Ayala Land all set to keep lead in premium segment
Property giant Ayala Land Inc. will continue to bank on the robust premium residential segment this year amid prevailing market conditions and shifting trends.
Of the P100 billion worth of residential projects to be launched in 2024, 80 percent will comprise upscale to ultra luxury projects by its Alveo and Ayala Land Premier brands, while the remaining 20 percent would be for the core segment, catered to by Avida Land and Amaia.
Growth potential
Anna Ma. Margarita B. Dy, president and CEO of Ayala Land, explained that this move was reflective of the current opportunities in the market, while pointing out the resilience and growth potential inherent in the premium segment.
“In the near future, the market that we feel is more robust is really the premium segment, which is why we are ready and really improving on our quality (and) specifications to make sure that we continue to lead in that particular segment,” she said in a briefing last week.
“But over the medium term, in a country like the Philippines, we need the core (segment) to come back, which is why we continue to nurture our Avida brand. We have the landbank and the projects. We continue to plan, and we intend to have projects on pushbutton mode so that if there should be opportunities, we will be very quick in being able to capture market changes,” Dy said.
Strategic market pivot
According to Dy, they saw this trend after the pandemic, during which the Philippines saw a period of higher interest and inflation rates. And in a market like this, it’s the middle income market that is usually affected.
As an example, she pointed out that the core segment is often reliant on mortgage whereas the premium segment is less reliant on mortgage. In fact, it was said that only 20 to 30 percent of the affluent who invest in premium properties take out a loan. This means that in a high interest environment, it would be the premium segment that may likely remain more resilient, and able to weather volatilities with greater ease, due to its reduced dependency on mortgage financing.
Thus to address potential challenges of a “higher-for-longer interest rate regime”, Ayala Land made a strategic pivot to sharpen its focus on premium projects for now.
“Everything that has happened since the pandemic, it’s usually the mid-market that is more vulnerable to these changes, (while) the premium segment is a little bit more resilient and that changes the behavior. We’re just making sure that we are addressing the market that we feel is the most robust.”
Surge in wealth creation
Such strong confidence in the premium segment, though, is not unfounded.
Historically, premium properties have shown resilience amid economic downturns, serve as hedge against inflation, and can command higher rental rates and resale prices. There’s also a high demand for such properties, particularly those in prime locations, making it easy to attract discerning buyers and maintain strong rental yields or capital appreciation over time.
According to a report by Santos Knight Frank (SKF), “recent years have witnessed a surge in local wealth creation in the Philippines, driving rapid expansion in luxury residential developments, including prime residences.”
Luxury residential properties have, in fact, seen a notable surge in popularity particularly after the pandemic—a trend seen to continue amid a recovering economy and the expected rise in the number of high net worth and ultra high net worth individuals in the Philippines, SKF reported.
Traditional strength
Dy acknowledges that they are not the only developers seeing this trend, especially now that more players are aspiring to play in the premium segment.
“(This) is why we have to make sure that our quality is really a differentiator. What’s going for Ayala Land is that we have the brand. We have the landbank. We have the sales force that really allows us to dominate in the premium segment,” she said.
“And plus the fact that this is really our traditional strength—we’re a high end player. So we’re just going back to what our traditional competencies are, and I feel that we’re also in the best position to capitalize the market. As I said, we have the brand; we have the landbank; we have the sales force,” Dy further stressed.
For this year, as Ayala Land goes heavy on its premium developments, it will also introduce slightly more horizontal projects (52 percent of the planned P100 billion worth of residential launches) than vertical (48 percent). Geographically, 44 percent of the planned launches will be in Metro Manila, 38 percent in South Luzon, 7 percent in Central Luzon, and 11 percent will be in Visayas and Mindanao.
Ayala Land is making a strategic pivot to sharpen its focus on premium projects for now.
