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Luxury property prices in Manila expected to fall back in 2009

Industry analysts are expecting demand from foreign property investors and experts to fall and this will have a major impact on the real estate markets.

According to Christian Cruz, senior economist at Global Property Guide, prices of luxury units in Manila could be affected as expats are called back to their countries because of ongoing job cutbacks.

Colliers International research manager Ramon Aguirre said he also believes that there will be downward pressure on luxury unit prices. 'So far, prices are still flat. Developers are still holding on to current high prices. But when demand dries up during the latter part of the year because of the slowing economy, they would have to lower,' he said.

A lot depends on how much developers are willing to budge. According to Clara Cordero, head of research and consultancy at Jones Lang LaSalle Leeched Philippines, some will have anticipated weaker demand.

'As early as the third quarter, developers realized that they could not count on buyers from overseas so what they did was concentrate on the local market. Local buyers can carry the market for the meantime,' he said.

There is potential room for buyers with cash to consider investing in property rather than stocks and shares because of their volatility.

'People with the money to spare are not investing in financial instruments right now. We could see a move back to basics such as property,' Aguirre said.

Some developers said they are not planning to lower prices. 'We even had a price increase in some of our luxury projects, where demand continues to be strong,' said a spokesman for Eton Properties Philippines.

However some analysts are warning that while local prices remained cheap relative to the region, constitutional restrictions on foreign ownership make neighboring countries more attractive.

Cordero said investors may also choose to invest in other Southeast Asian countries because they have advanced real estate investment trusts, which makes the markets there more transparent.

But foreigners may still be attracted to property in Manila because of its relative low cost of living and political stability.