Seeing light at the end of the tunnel: Metro Manila residential market recovers

(Last of two parts)

Colliers has observed steady demand for house-and-lot (H&L) and lot-only projects in key areas outside of Metro Manila including Pampanga, Cavite, Laguna, and Batangas. For Pampanga and Bulacan, we recorded about 7,200 H&L and lot-only units sold in 2022, up three percent year-on-year.

Meanwhile, we saw the average take-up for horizontal projects in the Cavite-Laguna-Batangas corridor reaching 18,700 units by end-2022, up two percent YOY. Colliers believes that developers will continue to venture into horizontal residential projects outside of Metro Manila where demand primarily comes from end-user buyers and take up is partly fueled by households receiving remittances from Filipinos working abroad.

Among the developers that are set to launch massive horizontal projects outside the capital region is Rockwell Land with its 85-hectare (210-acre) beach property in Lian, Batangas and a 100-hectare (247-acre) horizontal residential project in San Jose del Monte, Bulacan. Century Properties also disclosed that it is planning to launch two new projects under the Phirst Park Homes brand in Lipa, Batangas and Laguna in Q3 2023. Meanwhile, Cebu Landmasters has also announced its plan of launching horizontal projects in Southern Luzon particularly in Naga, Batangas and Cavite. The firm is also reportedly looking at Central Luzon for future expansion.

Completion to recover

Only one condominium project was completed in Q2 2023; Alveo Land’s Park Triangle Residences in Fort Bonifacio added 616 units to Metro Manila’s condominium stock. We expect completion to slightly pick up in H2 2023 with the delivery of 3,100 units, bringing total completion in 2023 to 4,920 units. By end-2023, we see Metro Manila’s condominium stock reaching more than 156,000 units, with the Bay Area, Makati CBD, and Fort Bonifacio accounting for about two-thirds of total completed units in the capital region. Investors are also looking closely at Fort Bonifacio as it will dominate other business districts in terms of supply in 2024.

Pre-selling demand improves

Colliers recorded the take-up of 15,200 condominium units in the Metro Manila pre-selling market in H1 2023, up 52 percent YOY. The lower and upper mid-income segments (P3.2 million to P12 million) accounted for 70 percent of condominium sold during the period. Pasig City, Bay Area, and the Alabang-Las Piñas and CAMANAVA (Caloocan-Malabon-Navotas-Valenzuela) covered 50 percent of units taken up from the lower and upper mid-income price segments.

Among the notable vertical projects launched in Q2 2023 are Ayala Land’s Park East Place in Fort Bonifacio, as well as Laya by Shang Properties and Olin at Jade Drive by Ortigas Land, both of which are located in Pasig City.

In our view, pre-selling residential demand will likely be supported by improving business and consumer sentiments, as well as stabilizing interest rates.

The Bangko Sentral ng Pilipinas (BSP) or the central bank’s latest Consumer Expectations Survey show that the share of households planning to purchase real estate marginally rose to 4.7 percent in Q2 2023 from 4.6 percent a quarter ago. Meanwhile, its Q2 2023 Business Expectations poll results show that the business outlook improved to 41.9 percent from 36.0 percent in Q1 2023.

Rents and prices up

In Q2 2023, Colliers recorded a marginal decline in residential vacancy to 17.2 percent from 17.4 percent a quarter ago. Vacancy improved across all sub-locations including the Bay Area, where vacancy reached as high as 26 percent in 2021.

We forecast vacancy to decline by end-2023 due to slower condominium completion and continued improvement in residential leasing particularly from returning expatriates in the country. Colliers has observed expat residential leasing picking up in Makati CBD, Ortigas Center, and Fort Bonifacio with demand led by those working for BPOs, shared service centers, multilateral aid agencies, as well as logistics and manufacturing industries.

This is reflective of the marginal rental recovery in Q2 2023 where we recorded a one percent growth in rents, slightly faster than the 0.5 percent increase in prices.

Colliers believes that vacancy in the secondary market will likely remain elevated in 2024 given the substantial completion of new units. We see this putting a downward pressure on rents especially in the Bay Area, which will likely account for 27 percent of completed units by end-2024.

Nowhere to go but up

Colliers Philippines is more upbeat this year. We are seeing recovery in key property sectors such as office, retail, industrial, and hotel. We believe that the residential segment will not be left behind. The country’s macroeconomic fundamentals remain sound and this should pave the way for a more dynamic property sector over the near to medium term. Investors are on the lookout for more properties to acquire and developers will definitely cash in on this demand. We’ve heard of revenge dining and spending. Now is the time for revenge investing.