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Investopedia defines "Capital Appreciation" as "a rise in an investment's market price." Pay close attention to the word "market."
For retail real estate buyers, "market" refers to the secondary market—not the developer's pricing.
Consider this scenario: A buyer purchases a pre-selling lot at ₱20,000 per sqm. Five years later, the developer is still selling lots in the same village at ₱40,000 per sqm.
Does this mean the buyer’s lot is now worth ₱40,000 per sqm? Not necessarily. Its actual value depends on how much it can sell for in the secondary market. Even if the buyer attempted to sell it back to the developer, it's unlikely they'd repurchase it at the new selling price.
From experience, secondary market prices typically fall 25% to 35% below developers' published rates. In this case, the lot would likely be valued at ₱26,000 to ₱30,000 per sqm—representing a 30% to 50% appreciation from the original purchase price, or an annual growth rate of 5.8% to 8.4% (which is within a reasonable range).
It's misleading to claim a property's value has significantly increased just by comparing a developer’s current price to its old selling price. I understand the temptation—without a centralized database of actual sales prices, many rely on whatever data is available, like the developer's published rates.
Here’s a real example:
A client bought a pre-selling lot in 2018 for ₱30,000 per sqm. By 2023, the developer was selling similar lots for ₱72,000 per sqm. The client was thrilled, believing his lot had more than doubled in value (a 19% annual appreciation). He even considered buying another lot from the developer, but I advised against it, finding the price excessive.
We attempted to sell his lot just below the developer’s price—but there were no buyers. After multiple price reductions, we eventually sold it for ₱47,000 per sqm—34% below the developer's published price. It was still a solid gain (8.5% CAGR), but far from the 19% capital appreciation he initially believed.
Despite how enticing these appreciation figures may seem, developers never OFFICIALLY advertise them—because they know it’s a misleading metric.