Recovery on the horizon
The Metro Manila condominium market is on its way to recovery. While the segment experienced disruptions in 2020 and 2021, we now see a better prospect for the condominium market especially as leasing and sales are rebounding.
Also contributing to its rebound is the gradual recovery of the office leasing market. We see more expats looking for residential units—whether condominium or house and lot—to rent while the “opportunistic” buyer’s market remains active.
In the secondary market, demand for condominium units is improving due in part to increasing take-up from local professionals and expatriates. This has been resulting in marginal improvement in vacancies across Metro Manila.
Meanwhile, Colliers sees continued recovery of rents and prices across the capital region—although still below pre-pandemic levels. Take-up in Q1 2023 provides some optimism but slower launches remain prevalent in the pre-selling market.
Secure green building certifications for residential towers
Colliers encourages developers to consider securing green building certifications such as Leadership in Energy and Environmental Design (LEED) or Building for Ecologically Responsive Design Excellence (BERDE) for their condominium projects. In our view, adopting green and sustainable features will play a crucial role in future-proofing not only office towers but also residential developments within and outside Metro Manila postpandemic.
Explore joint venture deals in launching upscale to luxury projects
Colliers sees the upscale to luxury segments (P12 million and above) likely remaining resilient despite rising interest and mortgage rates. In Q1 2023, these segments accounted for 22 percent of total condominium take-up in Metro Manila, up from 12 percent a year ago.
We recommend that property firms seize opportunities in the market by partnering with foreign developers for the development of more luxury projects. In our view, these joint ventures (JVs) should help local players differentiate their projects in the market.
As of Q1 2023, luxury condominium projects—developed through JVs with foreign firms, and which were launched since 2018–have take-up rates of between 75 percent and 83 percent. These projects have total contract prices (TCPs) ranging from P23.8 million to P68.8 million per unit.
Developers should also emphasize the JV projects’ upscale amenities, integrated features, topnotch concierge services, and strong potential for capital appreciation, which are important considerations for discerning buyers.
Slower completion
In Q1 2023, Colliers recorded the completion of 1,200 units, down 70 percent quarter-on-quarter. In 2023, Colliers projects the delivery of 3,540 units, down 61 percent from the 8,970 units completed in 2022. The Bay Area and Fort Bonifacio will likely account for nearly half of the new supply during the period.
Colliers recorded the take-up of 5,900 condominium units in the Metro Manila pre-selling market in Q1 2023, up 70 percent YOY. The lower mid-income segment (P3.2 million to P6 million) continued to dominate total take-up, accounting for 37 percent of total condominium units sold during the period.
In our view, take-up for these units will partly be sustained by remittance-receiving households. For 2023, the Bangko Sentral ng Pilipinas (BSP) forecasts remittances from overseas Filipino workers (OFW) to grow by 3 percent. Colliers is optimistic that a portion of the remittances will be invested in the residential market.
Faster price acceleration
In Q1 2023, vacancy in the Metro Manila secondary market dropped to 17.4 percent from 17.6 percent a quarter ago.
Vacancy in submarkets including Makati CBD, Fort Bonifacio, Ortigas Center, Rockwell Center and Eastwood City dropped by between 0.1 percent and 0.4 percent QOQ. Vacancy in the Bay Area reached 26 percent—its record-high.
Colliers expects vacancy in the secondary market to drop to 16.8 percent in 2023 due partly to continued recovery in office leasing, slower delivery of new units, and sustained improvement in business sentiment which should support take-up from both investors and end-users.
Due to improving vacancy, rents and prices increased by a marginal 0.5 percent and 1.4 percent quarter-on-quarter, respectively. In 2023, we expect rents to increase by 2 percent as residential leasing picks up.
Meanwhile, we forecast prices to increase at a faster pace than rents. Colliers sees prices in the secondary market growing by 3.9 percent by end 2023. Data from the BSP’s Q4 2022 Residential Real Estate Price Index (RREPI) report showed that nationwide house prices increased by 7.7 percent year-on-year, faster than the 6.5 percent growth in Q3 2022. According to the central bank, the growth was mainly driven by strong demand for condominium units and duplex housing in Metro Manila.
In our view, adopting green and sustainable features will play a crucial role in future-proofing not only office towers but also residential developments within and outside Metro Manila postpandemic
