Good year

There still seems to be no end in sight for the Philippine property sector’s good years.

While both demand and supply for newly completed condominium units were down during the first quarter of the year, these are expected to still increase for the whole of 2019 compared to last year, a newly released study has shown.

In its latest report, Colliers International Philippines noted that while demand and supply for the first three months of 2019 were down 3,500 units and 3,700 units, respectively, an increase of 7,100 units and 7,800 units is seen for the entire year.

Colliers sees strong take-up of newly- completed condominium units especially in the established business districts of Makati CBD, Fort Bonifacio, and the Bay Area. Meantime, over the next three years, it expects Metro Manila’s condominium stock to grow 19.3 percent to 141,760 units, with Fort Bonifacio and the Bay Area accounting for 75 percent of new units.

In terms of rent, these were up by 0.8 percent or P727, with prices for the entire year seen rising 1.2 percent or by 1.2 percent (P730). From 2019 to 2021, the report sees rents rising by 0.8 percent per annum due to sustained demand for completed units. It also projects faster increases in condominiums that complement offices with offshore gaming tenants.

Colliers also projects vacancies to slightly increase in 2019 and 2020 due to completion of additional units. In 2021, vacancy should start dropping as delivery of new units tapers, it said.

For those looking to invest, the report said that from 2019 to 2021, prices will grow by an annual average of 6.3 percent due to strong demand for completed units in Metro Manila’s key business districts. During the first quarter of this year, capital values rose six percent or by P195,000. For the whole of 2019, this is seen rising 9.7 percent or by P202,000.

Colliers said strong demand in the pre-selling market has continued to raise residential prices, with the most expensive condominium project now priced at approximately P550,000 per square meter. Meanwhile, leasing demand remains firm, especially in business hubs that house offshore gaming firms from China, it added.

The report recommended that developers offer creative leasing models such as co-living; highlight features of projects such as landscaping, retail options, and accessibility; launch more mid-income units; and for investors to cash in on the potential for capital appreciation of condominiums in light of planned rail projects that should improve connectivity.

Now let us look at the report in more detail.

During the first quarter of 2019, Colliers said it recorded the completion of 3,700 units, raising Metro Manila’s condominium stock to 122,500 units from 118,900 units at the end of 2018. The Bay Area business district covered nearly half of all new condo units delivered during the period.

In 2021, the report sees Metro Manila’s stock reaching nearly 142,000 units, about 19.3 percent higher compared to the end of 2018, with the Bay Area and Fort Bonifacio accounting for 75 percent of new supply, complementing the pace of office development in these two business districts.

In the first three months of 2019, Colliers noted that take-up among completed units that are either for lease or resale remains strong with overall vacancy in the secondary residential market in Metro Manila down for the sixth straight quarter. Vacancy is down to 10.4 percent from 10.6 percent in the fourth quarter of 2018.

It said that through 2019, Metro Manila will post a vacancy of 10.5 percent before rising to about 11 percent in 2020 due to the significant number of completions, and then declining in 2021 as the delivery of condominium units tapers.

For rents, Colliers said average rents in prime three-bedroom units in Makati CBD, Fort Bonifacio and Rockwell Center rose by 0.8 percent quarter on quarter. The report projects that in 2019-2020, rents in the three business districts will rise by an average of 0.6 percent due to the delivery of more units before rising to an average increase of one percent in 2021 as the completion of new units slows.

Meanwhile, it noted that capital values continue to increase with average prices of prime three- bedroom units in the secondary market in Makati CBD, Rockwell Center, and Fort Bonifacio ranging between P139,000 and P350,000 per square meter in the first quarter, increasing by an average of 6.7 percent quarter on quarter. Colliers projects prices to increase by an annual average of 6.3 percent from 2019 to 2021 as it factored in the new supply.

The report, likewise, observed that demand in Metro Manila’s primary and secondary residential markets has been strong. Aside from Chinese offshore gaming companies, take-up of pre-selling units has been growing on the back of sustained demand for affordable and mid-income projects (P1.7 to P6 million per unit), it said.

It pointed out that Manila’s luxury market, albeit smaller in terms of market share, has been growing consistently over the past three years in terms of take-up and launches, adding that the growing appetite is shown by the continued launches in Fort Bonifacio, the Bay Area and Makati CBD.

It said that with the dearth of developable land, the most expensive pre-selling project along Ayala Avenue in Makati CBD is very attractive among investors, it being the last opportunity to own a pre-selling property in the Philippines’ primary business district.

The report cited industry observer estimates that the most expensive luxury residential project in Metro Manila is currently at a pre-selling rate of about P550,000 per square meter.

Earlier, Colliers warned that breaching the record-high 54,000 units sold in the pre-selling market in 2018 could be a challenge, given the lack of developable land and rising land and construction prices. It said that it is retaining its earlier sales projection of about 45,000 units in the pre-selling market for 2019 and still sees brisk sales especially in the outskirts of major business districts like Makati, Ortigas, and Northern Quezon City.

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