Take up in both the pre-selling and secondary condominium markets in Metro Manila remains strong due to appreciation potential and a wider base of buyers following the influx of offshore gaming firms from China. A mix of local and foreign property investors are also enticed by projects developed by local players with foreign companies. 

The joint venture projects between foreign and Philippine firms are among the more expensive in the market, with the total contract price (TCP) per unit ranging from PHP7.6 million (USD149,000) to PHP31 million (USD607,800). Despite being classified as upscale and luxury, these projects have an average take up rate of nearly 90% as of H2 2019.

Aside from the capital appreciation potential, investors and end-users are enticed by upscale facilities, innovative concierge services, and the advantage of being in a master planned development. Colliers see strong take up from similar projects in Metro Manila being sustained over the next three years and thus project more aggressive launches from both local and foreign developers. 

Among the major foreign firms that either established or expanded their footprints in the country by launching projects with local players are Hankyu Realty Co., Ltd., Mitsui Fudosan and Nomura Real Estate Development Co.. Mitsubishi, which previously partnered with Ayala Land for the development of industrial parks in Southern Luzon, has a partnership with Alveo for a residential project in the eastern part of Metro Manila. Meanwhile, Hong Kong Land and Robinsons Land Corporation (RLC) have announced plans to develop a residential property in Pasig City. 

Colliers believes that local and foreign companies mutually benefit from these joint venture projects. While foreign firms are enticed by high yields derived from Philippine projects, local developers gain by being vouched for by prominent foreign brands. Japanese brands are particularly known for their precision and high architectural and engineering standards, making their condominium projects an attractive option for local investors.

Colliers believes that developers should seize the opportunity provided by the growing popularity of joint venture residential projects across Metro Manila by firming up stronger partnerships with foreign developers and launching upscale and luxury projects. In our opinion, local players should highlight their partnerships with Japanese firms known for their technological innovation. Local developers should also emphasize the projects’ upscale amenities, integrated development, and potential for capital appreciation, which are all important to discerning buyers. 

Stock of nearly 150,000 by 2021

In Q2 2019, Colliers recorded the completion of 2,600 units, bringing the total completion in H1 2019 to 6,300 units. As of H1 2019, Metro Manila's condominium stock stood at 125,150. Colliers now project condominium stock to reach 128,050 by the end of 2019, higher than our earlier forecast of 126,620 as three projects in Fort Bonifacio, Eastwood, and Makati CBD were completed ahead of schedule. 
Colliers sees Fort Bonifacio and Bay Area covering nearly 80% of new supply from 2019 to 2021. In our opinion, this complements the pace of office development in these two business districts as Colliers see them covering a third of new office space due to be completed during the period. 

Leasing remains firm 

The completion of additional units across Metro Manila in Q2 2019 resulted in a higher overall vacancy of 10.6% from 10.4% in Q1 2019. From 2019 to 2020 we see Metro Manila posting a vacancy of 11% per annum due to the significant number of new projects in the pipeline. However, Colliers see leasing activities remaining firm in sub-markets housing offshore gaming firms such as the Bay Area, Ortigas Center, Makati CBD and their fringes. 

Modest rental growth 

Average rents in prime three-bedroom units in Makati CBD, Fort Bonifacio and Rockwell Center rose by 0.4% QOQ. For overall Metro Manila, Colliers expect rents to increase by 0.9% annually from 2019 to 2021, close to our Q1 2019 forecast of 0.8%. Colliers still see sustained rental growth especially in business districts housing offshore gaming operators from China.

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 PHP145,000 and PHP362,000 (USD2,800 and USD7,100) per sq metre as of Q2 2019, increasing by an average of 3.7% QOQ. For overall Metro Manila, Colliers expect prices to increase by an annual average of 5.2% from 2019 to 2021, slower than our initial forecast of 6% as we factor in the new supply.

Source: Colliers International

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