Keeping the momentum

(First of two parts)

The Metro Manila condominium market is definitely turning a corner. After pandemic disruptions in 2020 and 2021, the vertical market is seeing glimmers of hope.

The completion of new condominium units is recovering while pre-selling demand is picking up. Vacancies in the secondary market are also recovering, resulting in an improvement in rents and prices. Developers, meanwhile, have been launching projects. What’s more interesting is that we see the launch of luxury and ultra luxury projects, with some units priced at more than P100 million each, breaching the P500,000 per sqm mark.

But will this optimism be sustained?

Developers and investors should be mindful of geopolitical and economic headwinds, such as surging interest and mortgage rates as well as the rising prices of construction materials. We are just slowly rising from the adverse effects of the pandemic and we want to keep the momentum.

Market rebound

Appetite for condominium units in the secondary market is rebounding as shown by improving vacancies in Metro Manila’s key business districts. This has resulted in marginal improvement in rents and prices after corrections in 2020 and 2021.

The completion of projects also increased in 2022 but we see a slowdown in 2023 partly due to the rise in the prices of construction materials. The construction price index reached a 14-year high in 2022. Meanwhile, the improvement in condominium take-up last year was supported by the central bank’s latest residential price index.

Overall, improving business and consumer sentiment should help boost demand not just for residential units in Metro Manila but also for horizontal projects located outside the capital region.

Test the market

Colliers believes that developers should further test the market for more luxury and ultra luxury projects.

We have observed stable demand for luxury (P8 million to P20 million) and ultra-luxury projects (P20 million and above) in Metro Manila. In 2022, the segment accounted for 34 percent of total condominium units sold, up from 5 percent in 2021. Colliers also recorded the launch of 6,000 luxury and ultra-luxury units in 2022, representing 25 percent of total launches during the period.

In our view, take-up from this segment will likely be supported by demand from affluent investors upgrading for their end-use. Investors also acquire these properties due to their capital appreciation potential.

Among the luxury and ultra-luxury projects that were launched in Q4 2022 include Rockwell Land’s Edades West and Arthaland’s Eluria. These pre-selling projects’ total contract prices range from P102 million to P149 million per unit, with per-sqm prices ranging from P472,000 to P519,000.

We see the launch of more luxury projects especially in major business districts being redeveloped. In the Makati central business district, for instance, we are seeing a redevelopment play due to the lack of developable land in major business hubs.

Postpandemic preferences

Developers should incorporate and aggressively promote features that cater to investors’ postpandemic preferences.

These include open spaces and amenities that will allow residents to work from home or multitask, such as co-working spaces, function rooms, lounges and smart home systems. Based on the results of our Q3 2022 Residential Survey, 83 percent of our respondents prefer condominium projects that offer good ventilation as well as green and open spaces.

More than 90 percent of respondents in an informal survey conducted by Colliers Philippines meanwhile believe that having green and sustainable features is important in a residential development. We thus encourage developers to consider integrating features such as water recycling and treatment facilities, sensor lighting, solar panels and pocket gardens to capture the demand from discerning buyers looking for innovative and sustainable features. These will likely be part of a newer and better normal.

Hence, developers should keep an eye on emerging trends in the market including the premium that investors and end-users put on these sustainable features. (To be continued)