Huge backlog remains

The housing backlog in the country is steadily increasing every year, with the estimated demand for housing at 5.5 million for this year compared to around 200,000 housing units sold each year based on the approved license to sell.

This is the reason why real estate developers have aimed to deliver one million housing units to reverse the widening gap between undersupply and increasing demand, Pinnacle Real Estate Consulting said in its second quarter 2016 Real Estate Market Insight report.

Pinnacle, however, pointed out that demand is coming from the luxury high-end as well as the affordable and socialized segments.

As far as the mid-market is concerned, supply appears to be adequate. The report noted the perception of too much supply is due to the brisk development of mid-market residential condominium buildings in Metro Manila.

“Some may be baffled why the top players like Ayala, DMCI, Filinvest, Lopez/Rockwell, Megaworld, Metrobank, Robinsons, SM, and Vista Land groups are continuously building. This is because they are successful in selling their products. Competing against these players for the same market segment, though, is not advisable since they have the marketing and financial clout to build, sell and deliver their projects,” it said.

The report also pointed out that in the past years, most developers have been offering developments in Metro Manila. However, at present, most top developers and even the second-tier developers are targeting other regions, especially the highly urbanizing regions, since competition in Metro Manila has been tighter in recent quarters, and land prices have been soaring, Pinnacle said.

For instance, the mass-housing 8990 Group is targeting the affordable segment and building outside of Metro Manila as well. It is launching 14 new projects all over the country this year with a total of 12,453 housing units, of which 46 percent would come from Luzon, 30 percent from the Visayas, and 24 percent from Mindanao, the report revealed.

The Pinnacle report also discussed the situation in another underserved demand in the residential market – the high-end segment. It noted that unlike the price conscious mid-market segment, the high-end luxury residential market is price resilient. Expatriates working in the Philippines, high caliber local executives, and discerning overseas Filipinos who experienced luxury amenities abroad, are all looking for facilities and services that suit their tastes and whims, and are willing to pay a higher price.

For such buyers, what is important is that the projects are low density, exclusive, secure, quiet, and oftentimes away from the bustling noise of the central business district (CBD), even when they are in the middle of the CBD.

The report, likewise, pointed to another trend, which is offering quality service like concierge/butler/valet services similar to a hotel. One project, The Residences at Alphaland Makati Place, has even raised the bar of amenities and services and incorporated The City Club in this high-end development. It is not only offering quality service, the full complement of clubbing is available, Pinnacle said.

Jojo Salas, Pinnacle director for research and consulting, said it is not only Makati and BGC that are seeing high-end residential products. Even the low-density city of San Juan is now seeing high-end condominium products. One86 at Wilson is a 32-unit, 10-storey residential project along Wilson St., which is bragging to be an extension of Greenhills. It is offering only four units per floor, tight security, and will provide services like valet and concierge to assist buyers and tenants alike, he said.

The report also said that given the level of real estate development, the Bangko Sentral ng Pilipinas recently launched its residential real-estate property index (RREPI) to evaluate housing developments and prices. Based on its three-quarter monitoring, housing prices increased 9.2 percent.

This increase, Pinnacle said, represents a vibrant housing industry in the Philippines that is confirmed by the trends in consumer prices and the recent result of the consumer expectation survey. Asset price inflation is quite remote because it is driven by robust demand, not oversupply according to BSP, Pinnacle added.

The report also explained that apart from brisk buying, one way of assessing the residential market is through the rental market. It cited rents of residential condominiums have been generally stable, given the wide range of options in the market. “Luxury condominium units command the highest rents that plateaued at P1,000 per square meter per month, or P300,000 per month-level for big units of 300 sqm-cut. The typical rental range for luxury two-bedroom and three-bedroom units is between P120,000 to P250,000 depending on the size, location and furnishing. For the luxury and high-end segment, there are limited choices for rent.

Leasing of studio and one-bedroom units is stable and still ranges between P15,000 to P30,000, and may reach the P50,000 per month-level, depending on the location, furnishing, and amenities of the condominium building. It would be worthwhile to monitor the rents of one-bedroom and studio units to evaluate the yields of these investment units,” it said.

Pinnacle revealed that one maverick group that is maximizing the rental market is the JNJ Summithill Group which is successful in servicing a market niche, building “dormitels” near major universities. Its first project is the “Upad” in the vicinity of De La Salle University-College of St. Benilde and St. Scholastica’s College offering rooms that can be shared by two, three, four or even six students. Professionals are most welcome and can opt to lease one room for himself/herself alone. Apart from very plush room amenities, Upad has a gym and a pool supporting the healthy lifestyle of the young students and professionals or “millennials”. The building is practically 100 percent occupied. It is now finishing its second project along P. Campa St. in Manila City, which is very close to the University of Sto. Tomas, and is already almost completely leased out, the report stated.

Pinnacle expects growth in the sale and lease of residential units to continue. This process would provide profit to the developers, while bridging the gap between demand and supply.

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