Residential condo market rebounds

After four straight years of decline, property developers in Metro Manila sold more residential condominium units to homebuyers ahead of completion in 2016, even as they launched fewer projects for preselling, property consulting firm Colliers Philippines said.

The rebound was mainly attributed by Colliers to the favorable interest rate environment that encouraged buyers to acquire condominium units.

However, Colliers reported that the take-up in the secondary market—referring to people looking to rent residential space—remained soft amid the influx of new supply.

Colliers reported a general downtrend in Metro Manila residential condominium rental rates and a continued increase in vacancy rates with the completion of new projects.

Some 2,000 residential units were taken up by the secondary market last year, 70 percent lower than the prior year and 66 percent lower than in 2012 when the take-up hit a record high.

But last year, property developers sold 38,800 residential units in Metro Manila via the preselling method, about 25 percent higher than the volume sold in 2015.

The volume of new residential launches, however, eased by 12 percent last year to 23,000, reflecting caution among property developers.

At end-2016, overall vacancy in Metro Manila stood at 10 percent, 2.2 percentage points higher than the vacancy recorded in the first semester of the same year, based on Colliers’ estimate.

Colliers sees overall vacancy hovering at between 12 percent and 16 percent in the next 12 months with the delivery of an additional 22,800 units this year.

“The theme for residential property is there’s massive supply in the next four years. Rents have softened. However, prices managed to go up,” Colliers Philippines deputy managing director Richard Raymundo said in a press briefing on Thursday.

As there’s a gap of four to five years for residential projects to be completed, Raymundo said property developers would usually get a good price during the preselling period.

But when the residential units are completed, that’s when the owners feel the weakness in rental rates.

In the fourth quarter of 2016, monthly rental rate per square meter for a luxury three-bedroom residential condominium in Fort Bonifacio was estimated at P640 to P1,026, declining by 1.5 percent from the previous quarter and falling by 6.37 percent year-on-year. Comparative rental rate in Makati central business district (CBD) likewise fell by 1.35 percent quarter-on-quarter and by 5.67 percent year-on-year to P560-P1,100 in the fourth quarter. Rockwell rental rates also eased by 1.3 percent quarter-on-quarter and by 5.19 percent year-on-year to P780-P1,070 as of fourth quarter 2016.

With the completion of new residential units, Colliers expects rental rates in Makati CBD and Fort Bonifacio to further drop by around 5-7 percent over the next 12 months while rental rates in Rockwell is seen to soften by 3-5 percent in the next 12 months.

“What’s interesting is when rentals started getting softer, it has an impact eventually on the yield -because you’re getting a lower yield if your rents are going down and at a certain point you just can’t increase the price forever,” he said.

Capital values for Makati CBD rose by 2.3 percent to P180,300 per square meter in the fourth quarter of 2016 from P176,200 in the third quarter. Fort Bonifacio prices increased by 2.2 percent to P163,200. Prices in Rockwell also increased by 1.1 percent quarter-on-quarter to P197,400.

Given the high sales volume in the pre-selling market, Colliers sees condominium prices rising further over the next 12 months. This is seen to result in lower residential yields for projects across major CBDs.

Colliers sees Makati CBD prices rising by about 14 percent in the next 12 months while Fort Bonifacio and Rockwell prices are seen to increase by 8 percent and 10 percent, respectively.