The Philippine property market is starting to recover after reeling from the debilitating impacts of Covid in 2020 and 2021.
Rebound still varies across submarkets but Colliers is optimistic that sustained macroeconomic growth as well as implementation of sound economic policies are likely to support the sector’s faster pace of recovery beyond 2024.
Office landlords should look at specific sub-locations that present development opportunities including second and third tier cities while focusing on occupants’ sustainability thrust; residential developers should further explore the viability of launching resort-themed projects outside Metro Manila; mall operators should continue renovating and redeveloping retail spaces while curating activity centre events. Hotel operators should remain aggressive in launching homegrown or foreign brands; while industrial locators should seize the demand from emerging industrial locators such as electric vehicles (EV).
Bolstered infra to support property recovery
In our view, the completion of crucial public projects conceptualized and started during the Duterte administration is likely to further raise the competitiveness of the Philippine property landscape.
In Metro Manila and nearby cities in central and southern Luzon, among the projects likely to raise land and property values include MRT-7, New Manila International Airport, Metro Manila subway, and the North-South commuter railway.
In our view, the completion of transportation projects in key cities in Visayas and Mindanao such as Iloilo, Cebu, Bacolod, Davao, and Cagayan de Oro should entice more developers to land bank and launch more projects in Visayas and Mindanao. New residential, office, retail, leisure, and industrial projects outside of Metro Manila should make the Philippine property landscape more interesting and competitive.
One trend that Colliers has seen over the past few years has been the development of more masterplanned communities and resort-themed projects in northern and southern Luzon.
Colliers attributes the attractiveness of these projects to the improvement of road networks from Metro Manila to property hubs in Luzon including Bulacan, Pampanga, Cavite, Laguna, and Batangas. These provinces no longer serve as mere suburban support to Metro Manila. In fact, developers have already carved out their own residential enclaves and business districts in key cities in northern and southern Luzon such as Angeles, San Fernando, and Porac in Pampanga; Marilao in Bulacan; as well as Kawit and Imus in Cavite.
RESIDENTIAL
Shift to horizontal from vertical
Colliers has observed steady demand for house-and-lot (H&L) and lot-only projects in key areas outside of Metro Manila. We believe that developers will continue to venture into horizontal residential projects outside the capital region where demand primarily comes from end-users.
Colliers has also been seeing the expansion of resort or leisure-themed projects outside Metro Manila and we project the launch of similar projects as property firms cater to a rising demand from a discerning and affluent market.
Developers have been taking advantage of the rising demand for resort or leisure-oriented properties outside Metro Manila. These projects were already popular pre-COVID-19 but the pandemic only highlighted the need for these leisure-themed developments.
Among the developers that have leisure-centric properties outside Metro Manila are DMCI, Rockwell, Megaworld, Ayala Land, Robinsons Land, Cebu Landmasters and Damosa Land with projects located in Cebu, Davao, Bohol, Palawan and Batangas. These projects remain popular, and Colliers encourages property firms to further assess launching similar developments.
Colliers encourages firms to further explore the viability of launching more resort-themed developments outside Metro Manila. The demand for these projects is also buoyed by investors’ preference for greener and more open spaces, a key requirement of end-users and investors post-COVID-19.
More flexible payment terms
Colliers has observed that payment terms in the pre-selling market have become very flexible especially at the height of the pandemic in 2020 and 2021. With the onset of recovery in 2022, Colliers continues to see the implementation of attractive and flexible payment options to entice investors and end-users to continue acquiring units.
Developers should continue offering affordable amortization and extended payment terms and even offer more innovative and attractive payment schemes, including discounts for spot cash buyers. With substantial completion of developments in the market, property firms should continue offering rent-to-own (RTO) schemes especially for projects that are nearing turnover. We see RTO schemes becoming more prevalent in 2024.
Return of expats, but not Chinese
Colliers has seen a recovery of the leasing market in 2022. We partly attribute this to the easing of mobility restrictions. In our view, the return of more expatriates has been fueling demand for condominium units for rent across Metro Manila. The demand from local employees mandated to return to traditional office set-up has also been chipping in to the take-up.
Colliers has seen Fort Bonifacio as one of the most preferred locations among expats due to the condominium projects’ proximity to schools, hospitals, and retail establishments. Other popular options include Makati CBD, Ortigas Center, and Rockwell Center.
To attract more expats, unit owners should consider renovating their condominium units. Owners should also highlight good brand and property management to attract discerning tenants.
New highs in luxury pricing
Colliers sees more luxury residential units being launched in the pre-selling market. We attribute this to rising land values, incorporation of upscale amenities, and surge in the prices of construction materials. Colliers believes that more luxury projects are likely to be launched in the future.
Recent launches are already at P670,000 to P760,000 per square meter. More partnerships with foreign brands are also likely to raise prices further.
As more expensive projects are offered in the market, Colliers only expects residential developers to provide upscale amenities and high-quality concierge services to potential investors.
OFWs to drive demand for affordable
to lower mid-income units
Colliers recommends that developers closely monitor key residential markets including overseas Filipino workers (OFWs). In our view, this market has partly driven the demand particularly for affordable to lower mid-income condominium units (P2.5 to P7 million per unit) within and outside Metro Manila as well as horizontal residential projects.
Developers should remain proactive in offering these units to households receiving remittances from their relatives working abroad. Meanwhile, latest data from the Philippine central bank show that the percentage of OFW households planning to allocate a portion of their remittances for the purchase of a property increased to 11.7 percent in Q2 2023 from 8.1 percent a year ago. The deployment of more Filipinos for overseas employment and sustained rise in remittances should continue supporting residential demand across the country.
Joint ventures to thrive
Colliers sees the upscale to luxury segments (P12 million and above) likely remaining resilient despite rising interest and mortgage rates. In 9M 2023, these segments accounted for 17 percent of total condominium take-up in Metro Manila, up from only 10 percent a year ago.
With the prevailing scarcity of developable land in Metro Manila, coupled with demand for luxury projects, Colliers sees more joint ventures between local property firms and foreign developers, including Japanese firms. In our view, these joint ventures (JVs) should help local players differentiate their projects in the market.
Developers should also emphasize the JV projects’ upscale amenities, integrated development features, topnotch concierge services, and strong potential for capital appreciation, which are important considerations for discerning buyers.
