Vacation homes set to remain in demand throughout 2022
HOMEFRONT Column by Victor Consunji, founder and CEO of Victor Consunji Development Corporation (VCDC)
The profound shift in home buyers’ mentality, loosening of restrictions, as well as both global and local macroeconomic factors are poised to lead the prices of vacation homes to new heights.
For those of us who fled the city with our families this past Holy Week, one thing was clear: Everywhere was fully booked. It was a shock to many and a stark contrast to what we are experiencing, even during the past Christmas season. Even though we were locked down for so long, without the option to go outside not by choice, we somehow are longing for that more private experience during those precious vacation moments.
Most COVID related restrictions have been lifted, but the feeling of being trapped in the city will likely stay prescient in the minds of many for a long time to come. We’ve been hearing from more and more from of our clients that having their own vacation home would be preferable to the increased exposure of a crowded resort, especially when travelling with elderly family members.
During the pandemic, in 2020 and 2021, we saw the demand for second homes increase tremendously in coveted locations such as Kawayan Cove and Tali Beach, with 2021 seeing an increase of almost 300 percent compared to 2019. The Peninsula de Punta Fuego saw the prices of gated residential subdivisions and resorts increase tremendously, hitting a range of P30,000 to P120,000 per square meter this past year, versus the P14,000 to P50,000 in 2019. A few years ago, these type of price levels would have seemed impossible.
Major infrastructure projects such as the NLEX-SLEX Connector, North-South Commuter Railway, CALAX and Central Luzon Link Expressway are all expected to be completed in the next two to three years, which will continue to make vacation homes even more accessible and raise land values accordingly.
Let’s not forget the purchasing power of the almighty OFW, which kept the Peso afloat during the pandemic and continued its rise recently, growing over four percent in 2021 and consistently demonstrating growth of four to six percent since 2010. With COVID restriction being removed around the world seemingly everywhere except for certain regions in China, it's easy to envision a scenario where 2022 is at the top of the historical range.
From a builder perspective the reality of this global inflationary environment means that prices for new home developments, built on top of increasingly expensive land, will have to increase as well. As one example, the price of steel is currently hovering around US$2,000 a ton, up almost four times since the lows of March 2020. It’s unfortunate, but price increases will continue to be passed on to the consumers and are beyond the builders’ control.
All of the above factors point to thecontinued interest in provincial retreat locations. Families who already have their primary residences are now looking to purchase their home away from home. However, it’s important to note that the continued appreciate of vacation home value that we are seeing nowis not without its risk factors.
The lockdowns in China, which are affecting the global supply chain could easily lead to “runaway inflation” and push prices to a point where demand worldwide wanes, which would reverberate around the world and certainly affect us here. The tensions due to the Russia-Ukraine war could possibly lead to a pullback in hiring and spending in the EU region, which would also affect the OFW remittances, as Europe (including the UK) is about 11 percent of the total $31.418 billion we saw remitted on shore in 2021.
More importantly than being a good investment, a vacation home needs to fulfil the emotional desires of its owners. Close proximity to a beach and good restaurants is paramount to any vacation experience, a second home community lacking these amenities will not likely get the usage and will be less desirable over time. Homes are not meant to be quick trades and when you truly enjoy owning your long-term investments, it makes being patient and holding during the pauses or drops in the market much easier.
A secondary home is meant to be an escape from the city. It’s a nearby getaway from metropolis, a space for the entire family that should be uniquely suited to their needs. Great connectivity and consistent power service is key, especially for the new generation of tech centric children and connected business owners who prefer the work-from-home lifestyle.
At VCDC, we’ve been studying the secondary home market for quite some time with great interest. It’s a foregone conclusion that soon enough it will be time for us to launch a foray into that segment of the market, if only because of the sheer volume of requests from our existing home buyers. Our companies mission has always been about providing homes, for all stages of life, and right now it seems that private provincial getaways are going to be a focal point for the next cycle of our collective growth and development.