Residential condo supply seen peaking in 2014

The supply of residential condominiums in the Philippines will likely peak in 2014 and taper in the following years as developers fulfill previous commitments and turn more conservative in bringing more inventory to the market, property consulting firm Jones Lang Lasalle said.

“A glut won’t happen because the units are delivered in a staggered way,” JLL associate director Antonio Sabarre said in a recent briefing on the property sector.

At the same time, he said, the new residential units coming into the market are priced at P1.5 million to P3 million, thus only addressing the housing backlog for this segment.

He said demand for units in this price range would remain strong in the next few years.

“For those asking if there’s a bubble, we don’t see it,” Sabarre said.

On an industry-wide level, Sabarre said there would be a tapering in the delivery of new residential units after 2014.

“More landlords and developers now are being more conservative on building more residential units. This is their way of planning for the future,” he said.

Based on JLL’s estimates, a little less than 60,000 new residential units will be delivered by 2014. The level will slow down to less than 45,000 by 2015 and around 30,000 by 2016.

The level is seen easing to less than 20,000 by 2017 and to close to 10,000 levels in 2018 and 2019.

At present, Metro Manila has a total supply of 145,530 residential units, 97 percent of which are priced at the “mid-range” or P1.5 million to P10 million, or about P50,000 to P110,000 per square meter.

The share of supply catering to the high-end market is estimated at only 3 percent.

These units cost at least P10 million, or from a low of P120,000/sqm, and have a minimum floor area of 160 sqm.

From the second half of 2013 to 2019, JLL estimated a total of 176,610 units coming onstream, 96 percent of which would still be in the “mid-range” price level.

David Leechiu, country manager of JLL Philippines, predicted that there won’t be a “bump” in the supply pipeline as previous commitments were fulfilled.

“The other reason is competition. Starting from low base, there was pent-up demand (years ago). It was the first time people had money and they all bought (residential condominium units). But competition is making it harder for smaller developers to enter the market, there’s a shorter list of developers able to successfully presell residential projects,” Leechiu said.