Leading diversified professional services and investment management firm Colliers expects a recovery in residential demand in 2022 on the back of rebound in office leasing, macroeconomic recovery, sustained remittances from Filipinos working abroad, competitive mortgage rates, and a pick-up in business and consumer sentiment. Colliers added that an accelerated vaccination program across the Philippines should support these factors and encourage more businesses to reopen and expand.
This was one of the observations highlighted by Colliers in its much-awaited Q2 2021 Philippine property market reports. Covering the months of April, May, and June 2021, the reports surveyed the performance of the office, residential, hotel, and industrial sectors for the second quarter of the year.
According to Colliers, the projected recovery in residential completion in 2021 partly indicates a rebound of the secondary residential market in Metro Manila. Colliers believes that an aggressive delivery of new condominium units is crucial especially for a supply-driven market like Metro Manila.
Aside from lining up more launches to maximize pent-up demand, developers should be aggressive in utilizing online platforms and improving amenities by incorporating coworking spaces to cater to the market’s discerning preferences.
The following are the observations highlighted in the Q2 2021 report.
Condominium completion to grow by 200%
Colliers expects the completion of 10,061 new units in 2021, about 200% higher than the 3,370 condominium units completed in 2020. We anticipate the delivery of about 7,500 units per annum from 2021 to 2025, with about 73% of upcoming supply still likely to be in the Bay Area and Fort Bonifacio.
Bay Area overtakes Makati CBD
As of Q2 2021, Colliers has recorded about 28,718 condominium units in the Bay Area, overtaking Makati CBD’s 28,551 units. At present, the Bay Area has the second largest condominium stock in Metro Manila, next to Fort Bonifacio which has 39,505 units.
Demand in fringe areas picking up as demand outstrips supply
Colliers has also observed a recovery in take-up of pre-selling condominium units in the fringes of central business districts. The demand in the peripheral areas has outstripped supply since 2018. For instance, in 2018 about 45,200 units were launched while 49,200 units were taken up. In 2019 41,000 were taken up with 40,200 new units launched. Colliers saw the same trend in 2020 with 32,700 units bought in the pre-selling market against 29,100 units launched. Among the top fringe areas in terms of take up from 2018 to H1 2021 are Makati Fringe, Manila-North, and Manila-South.
Vaccine to inject much-needed boost
Vacancy in Metro Manila’s secondary residential market increased further to 17.1% in Q2 2021, up from the 16.3% recorded in Q1 2021. Vacancy increased across all submarkets. The Bay Area recorded the highest vacancy of 23.8% partly due to the amount of new supply. Slower take-up from offshore gaming firms due to Covid-induced travel restrictions contributed to the subdued demand for residential units across the Bay Area.
Colliers expects take-up to gradually pick up starting H2 2022 due to our projected recovery in office leasing complemented by other recovery enablers. Cash remittances from overseas Filipino workers (OFWs) reached USD11 billion (PHP528 billion) from January to April 2021, up 5.1% YOY. OFW remittances are among the primary drivers of residential demand in the country, particularly projects that are within the affordable to mid-income price segments.
We also see the ramped-up vaccination program buoying residential demand as this is likely to spur an accelerated reopening of businesses and absorption of office space. The inoculation efforts should contribute to a recovery of investor sentiment as the government aims to achieve herd immunity by Q1 2022, which should inject a much-needed boost to the country’s residential sector.
Rents and prices to recover
Colliers saw a further correction in prices and rents in Q2 2021, declining by 3.2% and 1.7%, respectively. Due to an anemic demand for residential projects, prices and rents have been consistently declining across all Metro Manila submarkets since Q2 2020 when prices and rents declined by 6.1% and 2.1%, respectively. While we anticipate a continuous drop in prices until the end of the year, gradual increase is likely to begin in 2022 as take-up slowly recovers. Colliers expects a 2% average annual increase in rents and prices from 2022 to 2025.
In an attempt to lift demand in the pre-selling market, we have observed select developers offering discounts and promos to potential buyers. Aside from extended and attractive payment schemes, developers are also ramping up their marketing strategies by offering freebies such as appliances, gift certificates, and vouchers.
We continue to see an uptick in the demand for affordable to mid-income properties near transport hubs. Innovative payment schemes and proximity to infrastructure projects have also lured investors to acquire residential units in the fringes of major business districts.
On the other hand, demand for mid-income to upscale house and lot (H&L) properties outside the capital region have also been increasing as Filipino families start to prefer larger spaces and gravitate toward less dense communities in key urban areas in northern and southern Luzon.
- Line up projects in time for market recovery
Colliers encourages developers to start lining up projects in anticipation of a market rebound in 2022. In Q2 2021, projects within the mid-income to upscale price segments accounted for 95% of total take-up and we expect developers to continue launching more projects from these price segments. Colliers is already seeing more aggressive completions of residential units across Metro Manila, and we project a ramped-up launch of new projects beyond 2021. Colliers is starting to see the green shoots of recovery led by an improvement in Covid vaccination; the government-forecasted economic rebound in 2021; continued construction of key infrastructure projects within and outside Metro Manila, as well as some completed infrastructure projects; sustained remittances from Filipinos working abroad; and our projected pick-up in office leasing in 2022. Developers should be proactive in lining up marketing efforts to capture pent-up demand beyond 2021.
- Maximize the use of online platforms
Colliers encourages developers to maximize their presence on social media and other online platforms to inform potential buyers and investors of their upcoming projects and their schedules. An increased online presence should also help investors stay updated of the recent developments of their properties. With mobility restrictions imposed for Covid, developers ought to organize virtual showrooms and expositions showcasing their property offerings and the investment opportunities available. Aside from virtual expositions, we also recommend developers make transactions more convenient and accessible by offering an online option for payments and other relevant processes.
- Improve the amenities in upcoming projects
We believe that condominiums remain an attractive investment option for homebuyers. Colliers expects the completion of about 10,000 units in 2021. In order to increase competitiveness in the market and make properties more attractive to buyers, some developers have been incorporating features such as built-in fiber optic Internet connection, videoconferencing and coworking areas, designated smart storage facilities for contactless parcel deliveries, and open recreational spaces that are suitable for gardening and wellness activities. In our view, developers should continue upgrading amenities to satisfy the discerning preferences of buyers.
To download Colliers’ Q2 2021 Property Market Reports, click here (https://www.colliers.com/en-ph/research/colliers-quarterly-property-market-report-q2-2021-philippines).