By Francis Anthony T. Valentin
Special Features Assistant Editor
DESPITE growing fears over an oversupply of condominium units, the vertical property market in Metro Manila ended the year on an upbeat note, with condo take-up climbing to a record level.
According to the fourth-quarter residential property market report of real estate consultancy Colliers International Philippines, about 52,600 condominium units were sold in both the prime central business districts (CBDs) of Metro Manila and the surrounding fringe areas in 2017.
Not only is the figure considerably higher than 2016’s 42,000, it is also “the highest historically for Metro Manila,” topping the previous record of 51,600 units sold in 2012, Dinbo Macaranas, senior research manager at Colliers, said at a briefing in Makati City last February 8.
This record-breaking feat was partly helped by last-minute launches, which numbered about 34,000, Colliers said.
“When you have that sort of demand, the tendency is for prices to also go up,” Mr. Macaranas said.
And they did. For instance, at Rockwell Center, a luxury three-bedroom unit was selling for anywhere between P197,200 and P236,600 per square meter (sq. m.) during the third quarter of 2017. The following quarter, it fetched at a higher P198,000/sq. m. to P244,300/sq. m. range. The same unit also became a bit costlier in Makati CBD and Fort Bonifacio.
The uptrend in unit prices will likely continue, “especially considering that we’ve seen a lot of price increases recorded by different projects both in the primary and secondary markets,” Mr. Macaranas said.
Colliers also noted that across key business districts, the capital values of completed units marginally rose at a pace close to 2.5%, and credited this trend to the performance of the primary market that led to higher pre-selling prices.
Rents, meanwhile, showed an even more marginal growth. “Changes from 3Q 2017 showed variations of about one percentage point,” Colliers said. The top three CBDs in terms of rental rates last year were Rockwell Center (P873 per sq. m./month), Fort Bonifacio (P810 per sq. m./month), and Makati CBD (P803 per sq. m./month).
Roughly 2,900 units were delivered during the fourth quarter, and “[t]he completions during the quarter were concentrated in Fort Bonifacio and Makati CBD,” Colliers said. In 2017, the two sites contributed the most — 3,200 and 2,900, respectively — to the supply of condominium units, which reached 10,400 in Metro Manila. They were followed by Manila Bay Area (2,100), Ortigas Center (1,200) and Eastwood City (1,000).
Delays — not so uncommon in the market — have pushed back the expected delivery dates of about 27,200 units from 2017 to this year. That amount will constitute a record high for Metro Manila, Colliers said.
But those same delays, coupled with rental market demand from young professionals, helped bring down, albeit meagerly, the quarterly vacancy rate to 12.6% from 12.7%. “Anecdotally, we also noticed a growing community of Chinese and Korean nationals in CBDs more recently,” Colliers said.
Manila Bay Area had a fourth-quarter vacancy rate of 18.1%, the highest among the CBDs the firm is tracking. It was a tad lower than the preceding quarter’s 18.3%, a movement Colliers noted was attributable to the absence of new supply and the growing demand from employees of offshore gambling companies.
“Given the increase in demand, in the capital appreciation, or prices continuously increasing both in the primary and secondary markets, the question now is… will this demand continue,” Mr. Macaranas said. They, at Colliers, believe that it will.
The firm considered three things that led it to that belief. One is that Metro Manila goes toe to toe with several major Asian cities in terms of rental yields. Colliers noted that Metro Manila has an average rental yield of 5.3%, higher than Bangkok’s 4.4%, Singapore’s 2.9% and Hong Kong’s 2%. Only Jakarta (8%) and Ho Chi Minh (6%) outperform Manila.
Even when inflation was factored in, yields were still positive. “Yields across CBDs have fallen from a high of 9% in 2001 to just below 5% today. When adjusted for inflation, annual returns generally stayed above 1.5%,” Colliers said.
Finally, the yields will still be acceptable, the property consultant said, when average capital appreciation and bank mortgage rates are considered.
Colliers recommends that developers focus on the positioning of their projects. “Given the massive supply that’s coming online… location will be key,” Mr. Macaranas said. Now, he added, “Even the finishing and the quality of the structure will be key for the market.”