Property trends in 2016

Robust economic growth. A more challenging residential leasing market in Metro Manila. Correction in the office rental market. More townships to be built.

These are but some of the predictions for 2016 contained in Colliers International Philippines’ recent report. Here are some of them in more detail:

Robust economic growth this year

According to Colliers, increased government spending in the second half of last year will buoy the economy through 2016. Economists foresee that this year will be better amid strong private consumption and a benign inflation rate, as well as increased consumption due to the May national elections.

Asia still a key destination for global property investment

The report referred to its recent survey of over 600 investor all over the world where the respondents said Asia still plays an important role in their investment decisions, but more investors are taking a more cautious stance in their Asian investments. Colliers noted central business district offices are the preferred investment type for those investing in the Asia-Pacific region, followed by direct investments in development projects. It added there is a substantial increase in property development interest in the Philippines from foreign groups last year, particularly from Japanese firms. Top tier developers were in a position to turn away these interested parties due to the current accessibility of the capital markets, but according to Colliers, this can change moving forward as interest rates increase.

Metro Manila residential leasing market becomes more challenging

Colliers mentioned that around 13,400 new condominium units are to be completed in the major Metro Manila CBDs this year, more than double that of last year, and on the average, around 7,500 units would be completed until 2019, leading to an increase in CBD condo stock by 45 percent in such a short time. Thus, developers are looking for creative strategies to sell their rising unsold ready-for-occupancy inventories such as more flexible payment terms and new leasing models, it said.

Office rental market to correct

The same report revealed that unprecedented levels of new supply would be completed this year and next year and despite the fact that demand would keep growing at double digit rates, the new supply is increasing at a much higher rate. This excess supply, it emphasized, would push overall vacancy rates to around seven percent  by end of 2016 and there would be pressure for developers to drop rates. An overall correction in rents between 5-10 percent is expected by year end, hitting fringe areas harder.

More townships to be pursued

Colliers expects developers to continue pursuing township developments in and outside Metro Manila since townships offer better value proposition as they offer mixed-use developments making them more attractive to residential buyers.

It added township developments are seen to evolve further into mini-cities, where developers take the lead in providing public infrastructure and other services.

Hotel developments to focus on resort destinations

The report anticipates the development of four and five-star hotels in resort destinations to be more visible this year as the hotel market in Metro Manila becomes more crowded. Established branded hotel chains will come in to take over old, locally-managed resorts while branded condotel investment models with defined revenue-sharing schemes will be more popular than leisure home developments, it said.

Cavite as an urban center

With its relatively cheaper housing, a plethora of infrastructure projects that have been launched such as LRT-1 extension, the CALAX project, and the Muntinlupa-Cavite Expressway, Colliers says Cavite will bloom and boom on its own and property values will escalate rapidly.

Court battle underway

Just recently, we wrote about a brewing controversy in Butuan City, Agusan del Norte which surfaced after a group of lawyers exposed the purchase by the city government of allegedly overpriced China-made heavy equipment.

According to reports, the city, headed by Mayor Ferdinand Amante, acquired P120-million worth of heavy equipment from a certain Conequip Phils. Inc. But a group of lawyers, composed of Clint Dabalos, Dennis Bacala, Araceli Luyahan-Orcilla, Vincent Jose Fortun and Dendo Udarbe, discovered the allegedly anomalous deal and filed a petition with the Regional Trial Court of Agusan del Norte and Butuan City to stop the implementation of the project.

The said lawyers found out that while Conequip’s heavy equipment are considered one of the cheapest in Asia, in the bid submitted by Conequip, its equipment are far more expensive compared to its branded counterparts such as those from Caterpillar and Hino.

These lawyers suspect that there was connivance between the city and the winning bidder, Conequip Phils.

In their petition for a temporary restraining order and writ of preliminary injuction, they said the approved budget of the contracts (ABC) and the bid amounts submitted by the winning bidder were “strikingly similar if not identical figures.”

For instance, the ABC for the supply of four 10-wheeler dump trucks was P25,845,798. Conequip’s bid was exactly the same. The ABC and bid price of Conequip for the purchase of vibratory compactor were also similar.

Aside from Amante, the lawyers also included Conequip Phils. Inc. and the members of the Bids and Awards Committee as respondents.

While the prices of Conequip’s machinery are considered the cheapest in China, the lawyers in their petition said that the prices at which they were sold to the Butuan city government were much higher. For instance, Conequip’s brand-new crawler-type excavator costs P17,649,390 while that of Caterpillar, a well-known brand, only amounts to P6.2 million.

Conequip sold the 10-wheeler dump trucks at P6,461,449.50 each, more expensive than the Hino brand, which costs only P4.4 million.

The petitioners likewise noted that for almost all equipment, Conequip’s prices are much higher than those of other suppliers as follows - pneumatic pavement breaker: Conequip (P1,591,455), Volvo (P850,000); Vibratory compactor: Conequip (P6,067,200), Volvo (P3.2 million); Ten-wheeler tractor head: Conequip (P6,209,400), Volvo UD-Quester (P5 million); Garbage compactor: Conequip (P8,233,380), Dong Feng (P2.2 million); Six-wheeler garbage compactor truck: Conequip (P5,599,978), Dong Feng (P2.2 million); Transit mixer: Conequip (P3,999,991,20), Hino (P2,691,000); and vacuum at jetting truck: Conequip (P10,999,975.80), North Benz (P3,164,000).

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