Vertical, horizontal developments to end 2015 in contrasting styles

The last three months of the year is crucial in real estate transactions. Inquirer Property has asked property analysts what buyers and investors should watch out for in fourth quarter transactions.

Julius Guevara, Colliers International Philippines’ director for research and advisory services, said: “What investors should watch out for during the last three months of 2015 would be an increase in interest rates. The US Federal Reserve was indicating that they would finally increase rates this year as the US economy improves, but has again deferred that decision to December because of the devaluation of the yuan and continued economic malaise in Europe. Homebuyers should make the decision now in order to lock in on historically low rates.”

Guevara told Inquirer Property that “condo sales in Metro Manila have continued to slide, falling another 23 percent during the first 6 months of the year compared to the same period last year.”

Enrique Soriano, Ateneo program director for real estate and senior adviser for Wong+Bernstein Business, said that “performance of the (property) sector will depend on the different asset classes.”

“Overall, the residential segment will continue to grow, notably in the horizontal market. However, we are seeing signs of property pressure on the mid-priced condo market as investors are wary of the growing concern related to the perceived oversupply in the Makati and BGC (Bonifacio Global City) areas,” said Soriano.

Guevara said: “While total condo sales almost reached 40,000 units in 2014, we expect that sales would be in the low 30,000 level by the end of this year. On the other hand, sales of horizontal projects in the fringe provinces around Metro Manila have done better, with unsold inventory levels improving during the first part of the year. If the condominiums slated to be completed within the next five years in the major CBDs (central business districts) are completed on time, we will see a jump in condo stock of around 58 percent. For this year, the increase would be around 13 percent.”

He added: “This will definitely affect rental rate growth and cause an increase in vacancy rates. However, the worsening traffic congestion issues have convinced some to rent condos in the CBDs during the weekdays and just go to their actual home in the suburbs in the weekends, so this demand may taper the effect of the increase in supply.”

Claro dG Cordero, Jones Lang LaSalle Philippines Inc. associate director and head of research, consulting and valuation, said: “We do not foresee any major shocks to the property sector, hence, rental rates and capital values will register positive growth on back of healthy demand from the various drivers of growth—BPO/O&O expansion and new entrants, remittances from overseas Filipinos and arrival of tourists.”

“With an expected seasonal increase in level of remittances coming from overseas Filipinos in the last quarter of the year, we may expect to see some growth in residential sales, as well as increased retail sales/revenue for retailers and shopping malls,” said Cordero.

Demand in Q3, sale in Q4

Monique Pronove, chief executive officer of Pronove Tai International Property Consultants, said: “Seasonally, the fourth quarter is always a very active time in terms of sales and leasing transactions. For the office market, it is our experience for the past 13 years that demand picks up by the third quarter where inspections are conducted and business cases are submitted. Usually at the start of the fourth quarter, decisions are made to buy or lease, then negotiations take place and come November and December, contracts are signed.”

“It is no different this year, although the number of transactions has not been as robust as it was in 2013,” observed Pronove.

“The office and leisure asset classes and the premium or high-end residential segment will continue to experience steady growth in the tail end of 2015,” said Soriano.

Guevara said: “For the office sector, demand from the BPO industry continues to be strong, taking up most of the newly constructed space. Vacancies will continue to be tight in Makati CBD and Ortigas Center due to the lack of new supply, but an increase in office stock in Fort Bonifacio by around 214,000 square meters of new space by the end of the year may result in an increase in vacancy in that area.”