MANILA, Philippines–Metro Manila’s residential property market contracted in 2014 in terms of both additional inventory and sales take-up. But the current levels were, according to property consulting firm Colliers Philippines, “more rational” compared to the exuberance seen in the previous three years.
In a briefing on Thursday, Colliers Philippines director for research and advisory Julius Guevara said that nearly 40,000 residential units were sold last year, 7 percent lower than the take-up in 2013.
He said the decline might be due largely to a similar reduction in residential unit launches, which fell by 33 percent to nearly 39,000 units last year.
He said the residential property market was only continuing the “correction” that started in 2013 after hitting a high of 51,000 residential units taken up in 2012.
“We feel the market has now returned to more rational levels in terms of home-buying,” Guevara said, noting that Metro Manila’s primary residential condominium market would likely be able to sustain an annual residential unit take-up of 30,000 to 40,000 levels.
Asked to define what Colliers considered a “rational” residential market, Guevara said this was a market driven by real underlying homeowner demand and not investors who intend to rent out these units.
The Bangko Sentral ng Pilipinas has been tightly monitoring the real estate exposure of the banking industry and mapping out new regulations as a preemptive move against possible property bubbles.
Based on Colliers’ latest report, total residential licenses issued by the Housing and Land Use Regulatory Board declined by 4 percent in 2014, weighed down by the slowdown in the following segments: socialized housing (-15.7 percent); mid-income housing (-9 percent) and high-rise residential (-2.6 percent).
Only the low-cost housing segment expanded in 2014, with licenses issued increasing by 6.6 percent. Colliers said this was because more local developers were venturing into the affordable housing segment to meet the still huge supply backlog.
From 2015 to 2018, Colliers expects a total of 30,935 residential units to be delivered in the major business districts of Metro Manila, 40 percent of which are scheduled for completion in 2015. About 75 percent of these units are studio and one-bedroom types with floor areas of 18 to 90 square meters.
“The majority of these units will likely cater to young professionals and investors who are diversifying their investment portfolios,” Colliers’ latest research report said.
“As such, the influx of these smaller-sized units is expected to create pressure on rental rates and resale prices,” it noted.
The larger three- to five-bedroom units, according to the research, would account for 7 percent of the new supply with unit cuts of between 100 and 500 square meters.
In Makati central business district, the research noted that overall vacancy rate declined by 4 basis points to 8.1 percent in the fourth quarter due to the strong take-up of Grade A and Grade B projects.
Leasing activities, however, remained high in the lower end of the spectrum as Makati remained a preferred location, with vacancy rate in this segment declining by 60 basis points, it noted.
In the premium residential market, vacancy rate declined by 17 basis points to 4.4 percent, as there were new projects completed during the period. Colliers expects vacancy rate in this segment to rise by 260 basis points, as more units are slated for completion.
For the rental market, the research noted that rental rates in Makati CBD, Rockwell and Bonifacio Global City (BGC) posted a more stable growth in the fourth quarter of 2014.