Recovery of residential property sector seen in 2nd half of 2021

The middle-income and luxury residential property segments —some of the real estate sectors that have shown resilience during this prolonged coronavirus pandemic—will likely lead the recovery of the residential property segment by the second half of 2021, property consulting firm Colliers International said.

Joey Bondoc, senior manager for research at Colliers, said in a research note that despite the pandemic, residential developments priced at P3.2 million and above (referring to the middle-income to luxury segments) accounted for 89 percent of total units brought to the market by property developers in the first nine months of this year.

These segments also covered 85 percent of total sales in the preselling residential market, up from the 72-percent share in the same period last year. Over the past two years, these segments accounted for 68 percent of the total preselling take up in Metro Manila.

“In our view, demand in the residential sector in 2021 will likely be driven by mid-income to luxury projects,” the research said.

Colliers expects vacancy in the secondary residential market to decline to 13.5 percent by the end of 2021 from 15.3 percent in 2020. Good tidings from the government-projected rebound of remittances, lower mortgage rates, recovery of office leasing and the likely pick-up of take-up from end-users and investors in 2021 are seen to spill over to the residential sector.

With the increase in demand, Colliers sees residential prices and rents recovering starting in the second half of 2021 on the back of improved office space absorption. By the end of 2021, it projects prices and rents to firm up by 1.7 percent and 2.1 percent, respectively, a reversal from the contraction of 13 percent and 7.7 percent seen in 2020.

As of the third quarter of 2020, Colliers Philippines data showed that projects in these mid-income to luxury residential segments due to be completed from 2021 to 2022 have sold an estimated 86 percent of inventory. To tap pent-up demand, developers should continue to offer flexible payment terms and adopt property technology (proptech) platforms, including virtual reality (VR) tours and automated communication platforms for tenants and property management providers, Colliers said.

Due to further construction delays, Colliers estimated that residential units in 2020 had gone down by 59 percent to 6,000 units from its initial projection of 14,720 units.

In 2021, Colliers expects the completion of 7,270 new units, up by 21 percent from this year. Around 76 percent of the new supply during the period will likely come from the Bay Area, followed by Fort Bonifacio, Alabang, Ortigas Center and Makati central business district, the research said.

Condominium developers planning to tap the pent-up demand in 2021 should consider attractive price segments and locations for preselling developments, the research said.

—Doris Dumlao-Abadilla