Strong demand in the pre-selling market has continued to raise residential prices, with the most expensive condominium project now priced at approximately PHP550,000 (USD10,400) per square metre. Meanwhile, leasing demand remains firm, especially in business hubs that house offshore gaming firms from China. We recommend that developers should offer creative leasing models such as co-living, highlight features of projects such as landscaping, retail options, and accessibility; and launch more mid-income units. Meanwhile, investors should cash in on the potential for capital appreciation of condominiums in light of planned rail projects that should improve connectivity.

Condominium stock to reach 142,000 by 2021

In Q1 2019, Colliers recorded the completion of 3,700 units, raising Metro Manila’s condominium stock to 122,500 units from 118,900 units at the end of 2018.

Completion in the Bay Area continues, with the business district covering nearly half of all new condominium units delivered in Q1 2019. About 1,800 units were turned over following the completion of Shore Residences Building 4, accounting for half of the total residential units completed from January to March 2019.

Other new completions across Metro Manila include Lincoln Tower of The Proscenium at Rockwell, which added 490 units to Manila’s residential stock. 

Ortigas Center’s stock increased by 370 units following the completion of The Sandstone at Portico Tower 1 while the delivery of Verve Residences added some 560 units to Fort Bonifacio’s stock. Meanwhile, Escala Salcedo and Two Roxas Triangle raised Makati CBD’s stock by 430 units. 

In 2021 Colliers sees Metro Manila’s stock reaching nearly 142,000 units, about 19.3% higher compared to the end of 2018.

Through 2021, we expect the Bay Area and Fort Bonifacio to account for 75% of new supply, complementing the pace of office development in these two business districts.

Leasing remains firm

In Q1 2019, Colliers has observed that take-up amongst completed units that are either for lease or re-sale remains strong with overall vacancy in the secondary residential market in Metro Manila down for the sixth straight quarter. Vacancy is down to 10.4% from 10.6% in Q4 2018. Through 2019 we see Metro Manila posting a vacancy of 10.5% before rising to about 11% in 2020 due to the significant number of completions. We project vacancy then declining in 2021 as the delivery of condominium units tapers.

Flattish rental growth

Average rents in prime three-bedroom units in Makati CBD, Fort Bonifacio and Rockwell Center rose by 0.8% qoq, aligned with Colliers’ projection in Q4 2018. In 2019-2020 we see rents in the three business districts rising by an average of 0.6% due to the delivery of more units before rising to an average increase of 1.0% in 2021 as the completion of new units slows.

Prices continue to increase

Capital values continue to increase with average prices of prime three-bedroom units in the secondary market in Makati CBD, Rockwell Center, and Fort Bonifacio ranging between PHP139,000 and PHP350,000 (USD2,600 and USD6,600) per sq metre as of Q1 2019, increasing by an average of 6.7% qoq. We expect prices to increase by an annual average of 6.3% from 2019 to 2021 as we factor in the new supply.

Manila’s most expensive now at approximately PHP550K

Demand in Metro Manila’s primary and secondary residential markets has been strong. Aside from Chinese offshore gaming companies, take-up of pre-selling units has been growing on the back of sustained demand for affordable and mid-income projects (PHP1.7 to PHP6 million or USD32,100 to USD113,200 per unit). Manila’s luxury market, albeit smaller in terms of market share, has been growing consistently over the past three years in terms of take-up and launches. The growing appetite is shown by the continued launches in Fort Bonifacio, the Bay Area and Makati CBD. 

With the dearth of developable land, the most expensive pre-selling project along Ayala Avenue in Makati CBD is very attractive among investors; it being the last opportunity to own a pre-selling property in the Philippines’ primary business district. 

Industry observers estimate that the most expensive luxury residential project in Metro Manila is currently at a pre-selling rate of about PHP550,000 (USD10,400) per sq metre. 

Earlier, Colliers warned that breaching the record-high 54,000 units sold in the pre-selling market in 2018 could be a challenge, given the lack of developable land and rising land and construction prices. 

Colliers is retaining its earlier sales projection of about 45,000 units in the pre-selling market for 2019. We still see brisk sales especially in the outskirts of major business districts. These include Makati Fringe, Ortigas Fringe and Northern Quezon City area.

Recommendations

More creative leasing models
From 2019 to 2021, Colliers projects an average of 7,600 new condominium units per year. Developers with a substantial supply of Ready for Occupancy (RFO) units should explore more creative leasing schemes to help buyers lease out their units and attain their anticipated yields. In our opinion, developers should explore strategies aligned with each property’s market positioning, for example leasing out condominiums as shared units where this would not lead to a deterioration of their perceived value.

Highlight features of projects in the fringes
The lack of developable land and soaring prices in central business districts (CBD) are driving more investors and end-users to consider condominium units on the CBD fringe. To capture demand, we encourage developers to highlight the overall living experience in their projects to be considered viable options. Developers should highlight their projects’ quality of life, landscape features, retail options, and accessibility.

Investors to consider the potential for capital appreciation
Both end-users and investors should look at the capital appreciation potential of condominium projects that will likely be built near key infrastructure projects. Increased connectivity to be brought about by the Manila Light Rail Transit and Metro Rail Transit (LRT-MRT) Common Station, MRT 7, and Manila Subway, for instance, should propel property prices in key locations in Quezon City. In Ortigas Center, among the projects likely to raise property prices once completed are the Manila Subway and Bonifacio Global City (BGC)-Ortigas Link bridge.

Mid-income sweet spot
Starting in 2016, Colliers recorded declining take-up for affordable units (PHP1.7 million to PHP3.2 million or USD32,100 to USD60,400 per unit) which we partly attribute to slower launches. 

But this is being offset by increasing sales of mid-income (PHP3.2 million to PHP6 million or USD60,400 to USD113,200) projects. We encourage developers to continue launching projects within the mid-income segment while shrewdly gauging the market’s capacity for more upscale and luxury (PHP6 million or USD113,200 and above) projects over the next three years.

Affordable units in the fringes
Households looking to upgrade to condominium living should consider affordable condominium units in the fringe areas. Based on launches over the past 12 months, we see more options in the downtown Manila, Quezon City, and Ortigas Fringe areas.

For more information about Manila's real estate market, phone or email Joey Roi Bondoc, Research Manager at Colliers International Philippines via the contact details listed below.

Source: Colliers International

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