Keeping the momentum
(Conclusion)
This is the continuation of my column on Metro Manila’s residential market. This week, I will highlight our recommendations for developers and investors planning to capture gains in the residential market postpandemic.
Integrated communities
Colliers encourages developers to further explore the feasibility of launching more masterplanned or integrated communities in Metro Manila’s fringe areas. Megaworld, for example, launched its Winford township, which will feature condominium units and hotels in a casino complex.
The completion of railway projects such as the Metro Manila and Makati subways should further unlock office, residential and retail opportunities in these peripheral locations. Building more residential projects near these infrastructure projects is definitely the trend moving forward and developers should benefit from improving connectivity throughout the country.
Condominium stock up
As of end-2022, Metro Manila’s condominium stock reached 151,200 units, up to 6 percent from 2021.
We attribute this increase to the delivery of 9,000 condominium units in Makati central business district, Fort Bonifacio, Ortigas Center, Rockwell Center and Alabang. This is slightly lower than our initial projection of 10,100 units due to the delay in the completion of three projects.
The Bay Area accounted for about two-thirds of the new supply in 2022. From 2023 to 2025, we expect the annual average completion of 6,700 condominium units.
Pre-selling demand recovers
Colliers recorded 20,000 condominium units sold in the pre-selling market in 2022, an improvement from the take-up of 13,300 units in 2021.
Colliers believes that demand in the pre-selling market should partly be sustained by the continued inflow of overseas Filipino workers’ (OFW) remittances. The Bangko Sentral ng Pilipinas (BSP) forecasts remittances to grow by 4 percent in 2023. Further improvement in pre-selling market demand should also be buoyed by positive business and consumer sentiment and improving employment situation.
A faster pace of economic growth for the Philippines should also help sustain demand in the residential sector.
Meanwhile, full-year launches reached 24,200 units in 2022, down 19 percent year on year. In our view, the rising prices of construction materials likely tempered condominium launches during the period.
Data from the Philippine Statistics Authority (PSA) show that prices of construction materials rose by 8.3 percent—a 14-year high. This will be a major challenge to developers over the near to medium term.
Rents and prices to pick up
In Q4 2022, Colliers recorded a marginal increase in residential vacancy to 17.6 percent from 17.4 percent in Q3 2022.
Vacancy in the Bay Area rose to 26 percent during the period from 25.5 percent a quarter ago. This is partly due to the completion of 3,100 units in the submarket in Q4 2022. For 2022, the Bay Area accounted for 65 percent of the 9,000 units delivered across Metro Manila.
Meanwhile, vacancy in Makati CBD, Ortigas Center, and Rockwell Center improved in Q4 2022. This indicates improved take up of residential units for sale or for lease in these key business districts.
Colliers expects vacancy in the secondary market to drop to 17 percent in 2023 due to recovery in office leasing, muted completion of new units, and an improvement in business and investor sentiment which should support take-up.
In 2022, rents and prices increased by 1.2 percent and 3.9 percent, respectively. From 2020 to 2021, rents corrected by a combined 12 percent while prices dropped by 19 percent.
For this year, Colliers forecasts rents and prices to increase by 2.3 percent and 2 percent, respectively, as we project an improvement in vacancy. Data from BSP’s Q3 2022 Residential Real Estate Price Index (RREPI) report show that nationwide house prices increased by 6.3 percent year on year. According to BSP, this was mainly driven by a sustained demand for condominiums particularly in the capital region.
Recovery prospects
We see a lot of optimism in the market. This optimism is reverberating throughout the residential sector and developers and investors are ready to capture the gains.
Colliers is optimistic that the recovery prospects for the residential market are much brighter over the next 12 months. The residential market is definitely bound for rebound.
