Luxury spending on the rise in Philippines

MANILA, Philippines – The Philippines is emerging as a growing market for luxury brands as the number of Filipinos with high purchasing power continues to rise significantly, economists said.

“I believe the Filipinos’ standard of living has gone up, particularly for the empowered middle-class. Luxury cars and high-end residential condominiums are aspirational brands. Filipinos desire them when their standard of living has improved,” UA&P economist Cid Terosa told The STAR.

As the economy continues to grow  and inflation kept in check, economists said more Filipinos can now afford to purchase   properties and vehicles priced way above than those considered as a necessity.

“Yes, we can say more average Filipinos are becoming richer and we can say this is the outcome of our improving economy,” UA&P economist Victor Abola said.

As a testament to Filipinos’ rising purchasing power and the availability of more funds for discretionary spending,  German luxury automotive brand BMW has sold 1,000 units last year  through exclusive local distributor Asian Carmakers Corp.(ACC). Majority of these vehicles are bought by Filipinos, ACC said.

Sales of the luxury automotive segment grew 35 percent in 2015 from a year ago, according to ACC president Maricar Parco.

“Before, sales are just about 2,000 units. Now it’s almost 3,000 units for the luxury car segment,” Parco said.

In the local automotive industry, vehicles priced P2 million and above are considered part of the premium and luxury segment.

ACC launched recently its priciest car in the local market – the BMW 7 Series which comes with a variant priced at P12.5 million.

 “The Philippines has one of the fastest growth rate in the region and even the forecast for this year, we have one of the highest in the region at a minimum of six percent growth. Also, I think Filipino motorists are also improving on their quality of living and their taste. They’ve become more discerning. So it’s a mix of all of that,” Parco said when asked on the factors fueling growth in the country’s automotive luxury segment.

 “There is a consistent customer base for luxury cars and especially now with upcoming motorization of the Philippines, we see that growth to further continue and even grow higher,” ACC marketing director Karl Magsuci said.

As far as high-end and luxury condominiums are concerned, global property consultancy services firm CB Richard Ellis (CBRE) also noted a consistent take-up in recent years.

“Developments in the Makati and Bonifacio Global City areas are continuous and take-up has been very aggressive. Between 2013 and 2015, the market for luxury developments grew at a conservative rate of eight percent, cumulative,” CBRE Philippines director Alvin Fernandez said.

Similar to the growing demand for premium vehicles, Fernandez attributed the increasing demand for high-end and luxury residential condominiums – mostly in the central business district areas of Makati and Bonifacio Global City area – to the country’s upbeat economy.

He said majority of the buyers for luxury type condominiums are end users at about 60 to 65 percent, while 35 to 40 percent are investors.

Percentage of buyers between locals and foreigners are split at 50 percent each.

According to Fernandez, high-end residential developments typically have a price of more than P110,000 per square meter, while luxury projects cost at least P180,000 per square meter.

“Similar with middle-end projects, majority of the units for high-end residential developments are fully finished when turned-over. Mostly less than 10 units per floor. They have a less dense population since the unit cuts are larger compared to residential projects under middle end segment. Moreover, the primary selling point of condominiums under this type is its full range of expansive amenities for the unit owners’ and tenants’ convenience,” Fernandez said.

“Aside from the price, luxury condominium projects should be located in the heart of a major CBD or alternative CBD and have no more than four units per floor with a minimum size of 280 square meters. Units should have three  or more bedrooms, a fully equipped gourmet kitchen, centralized air-conditioning, high-quality finishes and at least two parking. In addition, the development should offer all of the amenities expected of a five-star hotel, while the condominium building itself should be surrounded by ample green space and open areas,” he added.

The economy accelerated 5.8 percent in 2015, lower than the government’s target of seven to eight percent but a growth that was still among the fastest in Asia.

For this year,the government expects the country’s gross domestic product to expand by 6.8 to 7.8 percent.