Property developers in the country are seen holding back on new residential condominium developments in Metro Manila this year to help address the supply overhang in the middle- and high-end segments.
In 2015, new residential projects in Metro Manila launched through pre-selling declined by 11 percent while the take-up of new inventory through pre-selling activities also contracted by 18 percent, property consulting firm Colliers Philippines said.
About 32,700 residential condominium units were launched in the metropolis last year and 32,400 units were taken up by the market.
“This is more reflective of the household creation that we see each year based on population growth in Metro Manila. Our estimate is that 30,000 new households are created each year. We’re now approaching that,” Julius Guevara, director for research and advisory at Colliers Philippines, said in a briefing yesterday.
“But of course you have to consider that not all of these households can afford housing,” Guevara said, adding that of the more than 30,000 units taken up through pre-selling, some were accounted for by foreign buyers and speculative investors.
The more cautious stance of property developers is likewise reflected by the decline in the issuance of licenses to sell by the Housing and Land Use Regulatory Board (HLURB) last year. Licenses to sell mid- and high-end condominium units fell by 11.9 percent while middle income housing licenses also fell by 10 percent. These are in contrast to the 82.4 percent growth in licenses issued by HLURB to sell socialized housing—reflecting the huge backlog in this segment.
“There has been a mismatch in terms of actual demand from the end-user market versus what has been developed. That’s why we’re seeing such slowdown,” Guevara said.
“In the horizontal space outside of Metro Manila, there remains unserved or underserved market. That’s where the actual demand lies, particularly in the lower end or socialized segment,” he said.
In the meantime, Guevara said the secondary market for residences in the metropolis continued to soften as the completion of new projects had added to the existing stock. As such, vacancy rates for residential condominium units in all major districts rose.
Rents continued to increase albeit at a modest rate of 1.1 percent quarter-on-quarter in the fourth quarter for all major central business districts (CBDs) in the metropolis, with Rockwell Center commanding the highest rate per square meter averaging at P963 per month. Makati CBD monthly rental rate averaged at P883 per square meter (up by 0.91 percent quarter-on-quarter) while premium condominium units in Bonifacio Global City averaged at P891 per square meter (up 10 percent quarter-on-quarter). In Ortigas, average rental rate rose by 1.2 percent quarter-on-quarter to P506 per square meter.
For the full year, however, Colliers Philippines sees average rental rate falling by 5 percent by yearend due to an increase in competition for tenants. This assumes that 13,500 new residential units scheduled for delivery this year will be completed.
Ieyo De Guzman, deputy managing director for investment services at Colliers Philippines, said: “The good side of it is that the developers are cognizant of the situation,” noting that by scaling back their product launches, they were “not adding to the problem” and were “mature” enough to take into consideration current market conditions.
Guevara added that the residential market was coming down to the “safe” level that merely matches the number of new households created each year.
“I don’t think developers will be launching aggressively this year or next year, at least not in Metro Manila,” he said.
Given the slowdown in Metro Manila’s residential property market, he said property developers were looking for new areas to develop as well as to build their recurring income stream, such as by building office space or hotel/leisure projects.