A SLOW RECOVERY in property prices will likely begin in 2022, as capital values last year fell more sharply than the decline seen during the Global Financial Crisis, Colliers Philippines said.

In a report released on Tuesday, Colliers Philippines said the pandemic dragged prices and rents in the secondary market lower by 13.2% and 7.8%, respectively in 2020. However, it noted this was still less steeper than the 14.5% and 15.4% drop in prices and rents, respectively, during the Asian Financial Crisis.

Metro Manila residential stock forecast, end-2020 and 2023

“Prices and rents corrected in 2020 due to dampened demand and we do not see a recovery in the next 12 months,” the company said.

Colliers said property prices and rents are expected to rise by 1.5% and 1.7% year on year in 2022, but this would depend on “a rebound in local and foreign investor sentiment and a recovery in office space absorption.” 

A precarious office leasing market in Metro Manila hobbled recovery in both the pre-sale and secondary residential markets, it said. 

“A lot of disruption and vacancies definitely have been rising across all major business districts in the capital region, and that of course has been having an adverse impact on the residential market, whether it’s pre-selling or secondary condominium market in Metro Manila,” Joey Roi H. Bondoc, senior research manager at Colliers Philippines, said at an online event.

“Prices and rent, of course these two indicators were severely affected in 2020, and we will probably see a slow recovery starting 2022 when the office segment finally recovers.”

Pre-terminations last year contributed to the rent decline in Metro Manila. Condominium leasing pre-terminations doubled in 2020 after overseas Filipino workers were repatriated and employees took on early retirement packages.

“We also observed owners offloading properties at near pre-sale prices and through loan assumptions,” Colliers said, observing re-sales at discounts in Quezon City, Mandaluyong, Muntinlupa, and Parañaque.

NEW SUPPLY

While take-up in pre-sale and secondary markets went down in the fourth quarter last year due to the pandemic, Colliers expects higher demand in 2021, which will be driven by mid-income to luxury projects.

“In 2021, we expect a rebound in completion with the delivery of 10,600 units, higher than our initial estimate of 7,910 units,” it said.

Colliers projected Metro Manila residential stock to rise 20.5% to 160,840 units by end-2023, from 133,460 units as of end-2020. 

“From 2021 to 2024, we expect the annual delivery of 8,600 units, an increase from 6,700 units we projected at the start of 2020,” Colliers said. 

Most of the new supply will be in the Bay Area, Fort Bonifacio, Rockwell Center, Alabang, Ortigas Center and Makati central business district. 

Supply decreased last year, with project completions falling 70% compared with 2019 as the industry experienced supply chain issues and limited manpower during the lockdown.

Meanwhile, Colliers said that vacancy in the secondary market will likely further rise to 16.9% this year, even after vacancy spiked to a record-high 15.6% in the fourth quarter of 2020. 

“This is due to the amount of new completions, as we expect the delivery of 10,600 units, a big uptick from only 3,370 delivered in 2020. We expect vacancy rates to recede starting in H2 2022, given our projected rebound in office leasing and take-up from investors and end users,” it said. 

In its recommendations, Colliers said developers should explore creative leasing models and consider fringe areas for their upcoming projects.

“Monitor attractive locations and price segments for pre-selling residential developments,” it said. — J.P.Ibañez