Top Philippine homebuilder Ayala Land targets the rich as high rates hammer middle class, ASEAN Business
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AYALA Land, the Philippines’ largest property developer by sales, is selling more expensive homes to boost its bottom line as higher interest rates squeeze its less affluent buyers.
Chief executive officer Anna Ma Margarita Bautista-Dy said that banking on richer clients – instead of its main middle income market – could help double the company’s profits in five years.
“The way we see it, the opportunity is in our premium segment, and we are capitalising on that,” she said on Thursday (Mar 14).
About 80 to 90 per cent of new residential projects that Ayala Land plans to offer this year cater to high-end buyers who usually pay in full, she said. At the same time, the company is tempering launches for the middle income market where 90 per cent of its customers seek mortgages to buy property.
Ayala Land, known for developing a business district considered Manila’s Wall Street, began selling its priciest high-rise apartments in December. Since then, it is sold about a fifth of its supply of 45 units across 45 floors, priced at US$9 million each. Dy said that a US$10 million unit in the future is “not impossible”.
These premium projects are targeted at customers earning 600,000 (S$14,449) to one million pesos a month, according to the company. That is up to three times the country’s average annual household income of 307,000 pesos in 2021, based on the latest government data.
Luring shoppers back
Dy said the company may spend around 500 billion pesos over the next five years to double its earnings, which rose 32 per cent last year to 24.5 billion pesos. For this year in particular, it has earmarked 100 billion pesos in capital expenditures, up from 86 billion pesos in 2023.
Ayala Land has also allotted 13 billion pesos to redevelop four key shopping malls to reflect how shopping habits have changed since the pandemic.
“Consumers are more demanding,” Dy said. “They have experienced e-commerce, and therefore if you want me back in the mall, you have to give me something more.”
Before becoming Ayala Land’s first female chief executive in October, Dy helped build the company’s land bank with increased acquisitions of idle lots that were transformed into mixed-use developments. When asked about plans for more land purchases, she said the company is focusing on using what they have.
While she is upbeat on the company’s prospects, Dy said there are also challenges ahead, including artificial intelligence. That could disrupt the call centre industry, which are key tenants of Ayala Land’s office business.
There are also challenges in the middle-income residential market. Payment terms are being stretched as buyers cope with higher mortgage rates and inflation, she said, which increases the possibility of default. But a potential cut in interest rates could improve that segment and allow the company to shift its real estate offerings.
“We are keeping projects on push-button mode,” she said. “If the market turns, we are ready to launch.” BLOOMBERG
