S&P: Price gap in Phl housing to persist as developers focus on high-end market

S&P Global Ratings said the wide price gap between presale and second-hand home units might persist in the next two years as the country's major developers shift their focus on wealthy clients and land banking.

This comes against a backdrop of the condo market facing a surge of unsold units in 2024 compared to the previous year.

Developers looking to shift their focus include Ayala Land Inc., Megaworld Corp., Robinsons Land Corp., and SM Prime Holdings Inc.

S&P said their presale units last year were being sold 50 to 90 percent higher than equivalent types of homes in the secondary market.

Citing data from Colliers International, S&P said that was a hike of 10 to 35 percent compared to the levels in 2020.

"Presale unit prices won't likely drop significantly, in our view, due to a skew toward high-end projects, increasing construction costs, and developers' reluctance to cut prices to avoid sending negative signals to the market," the global market researcher said.

High-end properties cost at least P12 million.

The four developers last year expanded launches of those properties to 41 percent of their total project portfolios from 20 percent in 2023, S&P said. Its analysts expect this trend to continue.

"Wealthy homebuyers are less sensitive to inflation and interest-rate hikes," S&P said.

"Inventory levels also remain low in the premium segment, which accounts for about 5 percent of total inventory in Metro Manila," S&P said.

Ayala Land reported high-end presale units contributed 60 percent to total presale revenues, while Megaworld posted 80 percent.

Manageable capital costs

Amid the shift from middle-income market residential projects, S&P said the major developers will likely sustain capital inflows and recycling to fund land banking and high-end projects despite rising debts due to strong revenues in retail subsidiaries, long-term leases, and huge asset pipelines.

S&P said The four developers' debt jumped by 44 percent from 2019 to 2024, while their combined EBITDA (earnings before interest, taxes, depreciation, and amortization) only grew by 12 percent.

"Even in a period of economic uncertainty, they have prioritized expansion, counting on the country's broad-based economic growth, as well as a significant runway for property growth," S&P said.

"Entities are increasing investment in retail assets amid improving consumer sentiment," the global market researcher added.

As additional funds to developers, S&P said sales from middle-income market projects might rebound faster in the next two years compared to the eight year outlook of Colliers as interest rates are seen to decline and property demand in the provinces rise.

Ayala Land, Megaworld, and Robinsons Land have increased land acquisitions in the countryside to over 90 percent of its total portfolio.

Meanwhile, the value of unsold properties in Metro Manila jumped by 77 percent last year to P158 billion or 30,000 units compared to 2023.

Aside from possible pickup in inventory sales, S&P said the top developers continue to tap REITS (real estate investment trusts) in funding expansion projects.

REIT investors gain income from dividends out of the profits developers acquire from operations of their multiple property business segments, such as malls, hotels, and office buildings.

"There is ample room for further capital recycling," S&P said.

"Listed REIT platforms enable asset monetization and capital recycling by allowing developers to inject stabilized, income-generating assets into their listed REITs," S&P added.

Unsold units surged

While demand for condominium units in Metro Manila rose by 14 percent in the first quarter of 2025 — thanks to lower interest rates and aggressive developer promotions — the market continues to face a serious oversupply problem. According to Colliers Philippines, the value of unsold condo units in the capital surged to P158 billion in 2024, marking a 77 percent increase from the previous year.

This imbalance is prompting a noticeable shift in residential demand toward regions outside the capital. Emerging growth hubs such as Batangas, Davao, and Cebu are attracting strong interest, particularly for resort-style and mid-income housing. Some developments in these areas are nearing full occupancy, offering developers new opportunities to expand and diversify away from Metro Manila’s saturated market.