Davao property gearing up for recovery

While we see encouraging news about the potential rollout of a COVID-19 vaccine in the Philippines later this year, we should remain cautiously optimistic as a strong economic recovery is unlikely to happen in 2021, according to the country’s economic managers.

Still, we should be on the lookout for opportunities in the property market. Currently, office leasing remains challenging across the Philippines. The launches and take up of residential projects remain slow while retail and leisure continue to suffer from subdued demand. A bright spot for the property market is the industrial sector. In our view, the segment remains stable despite the disruptions brought about by the pandemic.

There are several bright spots in the Philippine property market. It is particularly interesting to see which property sectors and locations are likely to lead recovery once the economy rebounds and market sentiment improves.

Investment hub

Among the viable property investment destinations in the country is Davao. It has become the most attractive property hotspot in Mindanao.

On Jan. 29, I did a Zoom presentation on Colliers Philippines’ forecast for the Davao property market. It was an engaging webinar with Damosa Land’s Cary Lagdameo who presented opportunities for the agro-industrial sector in the region.

Colliers Philippines believes that Davao City has become a preferred residential hub in Mindanao due to its competitiveness. In the 2019 Cities and Municipalities Competitiveness Index, Davao ranked as the third most competitive highly urbanized city. We believe that the city will likely sustain its attractiveness as a property investment hub even beyond the term of President Duterte, the former mayor of Davao.

From 2017 to 2019 the average annual take-up of vertical projects in the city reached 5,300 units, higher than the 2,500 units from 2014 to 2016. In the first half of 2020, projects under the mid-income segment accounted for 60 percent of sales during the period. We believe that projects under the segment may partially fuel the recovery of take-up in 2021 once the pandemic is contained.

Davao remains as a viable outsourcing hub outside of Metro Manila due to its skilled manpower. Similar to what we project in Metro Manila, we are likely to see a decline in office leasing activities in the city in 2021 given the uncertainty brought about by the pandemic. In our opinion, a recovery in 2021 is remains uncertain.

We believe that over the next few years buyers are likely to prefer residential projects, whether horizontal or vertical developments, located within townships. We expect that around 25 percent of the upcoming supply from 2021 to 2022 will likely come from these integrated communities.

Integrated communities

Colliers Philippines believes that the COVID-19 pandemic has highlighted the need to be in an integrated community.

In our opinion, Davao City will likely remain an attractive residential option for both end-users and investors in Mindanao post-pandemic. But the demand for residential projects, whether house and lot or condominium units, will likely hinge on integrated features, i.e. unit owners can easily access essential goods and services.

Hence, we encourage developers to highlight the integrated features of their residential projects as this will likely be among the major considerations of unit owners.

Proximity to infrastructure projects

Developers should also highlight the price appreciation potential of land and residential projects that are planned near key public projects lined up by the government, including Davao Coastal Road, Davao Monorail, Mindanao Railway Project (MRP) and the Davao Bus Rapid Transit (BRT).

These projects are likely to help spur demand for residential projects even beyond the COVID-19 pandemic. Colliers believes that Davao City, being a preferred business location in Mindanao, will be among the major beneficiaries of the government’s massive infrastructure push.

We see tremendous opportunities for areas outside of Metro Manila, including Davao. In our view, the viability of these locations is likely to be buoyed by the government’s massive infrastructure and decentralization program.