Colliers International Philippines' latest residential report for Q2 2018, suggests that luxury condominium demand should remain strong due to the fact that Metro Manila maintains one of the most attractive rental yields in the region thanks to relatively low prices, and sustained demand from affluent Filipinos, foreign investors, and offshore gambling firms.  

Manila's luxury market is relatively small but has seen stable demand over the past few years. Projects being leased or sold to the secondary market continue to receive strong demand which entices affluent locals and foreign investors to look for similar developments in Metro Manila.  

Philippines residential market forecast at a glance:

• Demand: The take up for condominium units in the secondary market covering major business districts is sustained by demand from foreign and local professionals working in central business districts (CBDs). As of 1H 2018, about 30,000 units have been taken up in the preselling sector. Colliers sees the take-up breaching the 60,000 mark in 2018.
• Supply: Colliers sees the delivery of at least 7,300 units in 2H 2018. Manila Bay, Fort Bonifacio, and Rockwell will likely account for 84% of new units in 2H 2018. Barring construction delays, Colliers expect about 8,600 units being completed annually from 2019 to 2021. 
• Vacancy: Colliers sees overall vacancy rates in Metro Manila hovering between 11% and 12% by end-2018. From 2019 to 2021, Colliers see vacancy inching up to 12% to 13% per year as the completion of new units accelerates. 
• Rent: From 2019 to 2021, Colliers sees a marginal rise in rents, projecting lease rates growth by 0.3% to 0.5% per annum during the three-year period as new supply from the Bay Area and Fort Bonifacio is factored in. 

Colliers report identifies that more affluent locals are seeing luxury condominiums as a viable investment option aside from the stock market. The shift in lifestyle also encourages high-end investors and end-users from posh villages to embrace condominium living. 

Condominium units that target these upscale and high-end markets are those priced at PHP6 million (USD112,000) and up. Colliers believes that the Bay Area is an attractive location for wealthy families from Southern Luzon and cities in Metro Manila who are upgrading to condominium living. 

Metro-wide occupancy improves

The occupancy of residential condominiums offered to the secondary market further improved in Q2 2018. Colliers attributes this to stronger leasing from foreign and local professionals working in CBDs as well as Chinese investors and workers employed by offshore gaming companies.

• Metro Manila vacancy declined to 11.3% in Q2 2018 from 12.4% in Q1 2018 as major submarkets such as Makati CBD, Ortigas Center, Manila Bay Area, and Rockwell posted lower vacancies.
• Makati CBD’s vacancy in Q2 2018 declined to 11.5% from 12.3% in Q1 2018. Vacancy across Premium and Grade A condominium buildings dropped to 17% and 10%, respectively.
• Fort Bonifacio’s vacancy dropped further to 15.8% from 17.3% in Q1 2018. Aside from sustained demand from expatriates, condominium units in the business hub continue to benefit from a sustained interest from affluent families looking for residential units to stay and invest in. Colliers suggest the transfer of the Philippine Stock Exchange operations to Fort Bonifacio should also have a positive impact on Fort Bonifacio's residential towers.
• From 14.8% in Q1 2018, the Manila Bay Area’s vacancy dropped to 12.9% in Q2.
• Rockwell’s vacancy during Q2 2018 dropped to 10.3% from 11.3%. Condominium units in Rockwell Center continue to benefit from stable demand from expatriate families drawn to the residential enclave’s community environment.

Throughout 2018, Colliers expect Metro Manila vacancy to hover between 11% to 12% given the strong demand; lower than their initial projection of about 12% to 13%.

Aside from sustained demand across the country’s capital, Colliers attributes the lower vacancy to a drop in the projected delivery of new condominium units for the rest of 2018. 

Leasing units to target Chinese, more partnerships with foreign developers

Colliers recommends that developers with significant ready-to-occupy units, especially in the fringes of established business hubs, to specifically target the Chinese employees of offshore gaming firms.

Colliers encourages developers to capture opportunities in these areas by exploring the type of residential component, condominiums or condormitel (condominium units operated as dormitories,) which are favourable to this tenant profile.

Click here to view Colliers International Philippines Q2 2018 Quarterly Report: Residential Sector.

For more information or to discuss the report, phone or email Joey Roi Bondoc, Research Manager at Colliers International Philippines via the contact details listed below. 

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