Paving the road to recovery

Colliers Philippines presented its Q4 2020 property market presentation on Feb. 9. We highlighted our data-supported insights and recommendations and answered questions from webinar participants, which peaked at 572—our largest so far.

Part of the discussion was how the pandemic has disrupted the country’s economy, with the Philippines recording a 9.5 percent contraction in 2020—our worst economic performance since 1947. Analysts are seeing a slow pace of economic recovery and this will continue to disrupt various property segments such as office, residential, retail and hotel.

At Colliers Philippines, we believe that the forecasted rebound in gross domestic product (GDP) will hinge on the implementation of major infrastructure projects including Skyway 3, whose recent opening has been all over traditional and social media.

In our view, this should play an important role in reviving the Philippine property market. The completion of toll roads, cargo rails, subways and airports will further play a major role in paving the proverbial road to recovery.

Despite the challenges, Colliers sees opportunities in the residential market. During our webinar, we highlighted a few recommendations for developers and how they should prepare to tap pent up demand.

Monitor attractive price segments, sites

In 2020, take-up in the pre-selling market reached 31,380 units, down 34 percent year on year. During the same year, mid-income to luxury projects contributed 86 percent to the total take-up, higher than 72 percent recorded in 2019. Colliers Philippines data showed that more than 90 percent of new launches in 2020 were classified as mid-income to luxury projects.

Developers should monitor these price segments, as we expect demand to be driven by these projects beyond 2020.

Creative leasing models

As of end 2020, remaining inventory in Metro Manila stood at 42,511 units, down slightly from the 42,768 units recorded in the third quarter of 2020. More than 35 percent of the remaining inventory during the period were classified as ready-for-occupancy (RFO) projects.

We recommend that developers with a substantial number of RFO units continue to explore creative leasing models and to assist their clients in achieving their target yields. Given increased concerns on safety, we also encourage developers to highlight their property management’s strict compliance to health and safety protocols.

Further diversification

The share of upscale to luxury developments (priced at P6 million and above) to new project launches has been on the rise. In 2020, these segments accounted for 41 percent of the new launches, up from an annual average of 25 percent between 2015 and 2019.

While demand for upscale to luxury projects remained steady, we recommend that developers consider launching more affordable to mid-income developments (priced at P1.7 million to P5.99 million) to capture a more diverse market including overseas Filipino workers (OFWs) who partly drive the demand for these segments.

Colliers believes that condominium developers should also be on the lookout for fringe areas that are ripe for residential development and are recording strong pre-sales, including the Caloocan-Malabon-Navotas-Valenzuela (Camanava) corridor, Pasig, Quezon City North, and Manila South. These areas accounted for 47 percent of aggregate take-up for affordable to mid-income projects in 2020.

Recovery enablers

Aside from the potential roll out of a COVID-19 vaccine this year, Colliers believes that there are other factors likely to revive demand in the residential sector over the next 12 to 18 months. These include the following:

• A central bank survey showing an improvement in the number of households planning to buy a property in the next 12 months;
• Attractive and extended payment terms, which are being sweetened further as developers give out appliances, laptops and other gadgets; and
• OFW remittances that have been holding firm for the past 12 months.

In our view, developers and their sales and marketing teams should continue engaging existing and potential clients.

During the pandemic, I have conducted several webinars for developers targeting OFWs and local professionals. These innovative and insightful client engagement schemes should be maximized by property firms to become top-of-mind in the local condominium market.