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On the road to recovery (Part 1): Prices, rents recover as M.Manila condominium market rebounds

Colliers Insights

By Joey Roi Bondoc

Condominium buildings are seen from the Estrella-Pantaleon Bridge in Makati City, Dec. 5, 2022. — PHILIPPINE STAR/MIGUEL DE GUZMAN

COLLIERS PHILIPPINES believes that the residential market will greatly benefit from a strong rebound of the Philippine economy.

Equity analysts and private sector economists are projecting the Philippine economy to expand between 5.5-7% in 2023, after last year’s 7.6% growth which was the fastest pace in more than 40 years. This optimism is supported by the bright outlook of the government’s economic managers. 

Colliers is optimistic that this pace of expansion bodes well for the Philippine property market and should ensure the segment’s rebound after a disruptive two-year period (2020-2021).

In our view, a more optimistic forecast about business expansion and the entry of foreign investments will help drive the property sector, especially the residential market. According to the central bank, consumers and businesses are more optimistic and this should support further expansion of businesses and eventually, the acquisition of more properties, including residential units across the Philippines.

Over the next 12 months, developers are likely to be more cautious with their new launches; with landbanking likely to rely heavily on the government’s massive infrastructure program. Colliers believes that the residential market is starting to see some recovery but this will mainly hinge on economic expansion, including the level of remittances and investments that will flow into the country.

Over the past six months, residential leasing has picked up, partly supported by demand from foreign employees of outsourcing firms, consular offices, and multilateral lending firms based in the Makati, Ortigas and Fort Bonifacio central business districts. These business hubs have also been benefiting from improving office space take-up.

The decline in residential vacancies has positively influenced rents and prices. In the pre-selling market, there has been an increase in launches and take-up in the first half.

What’s positive for the residential market is that recovery is seen not just in the secondary but also in the pre-selling market. We are still definitely far from pre-pandemic demand, especially since there is no longer demand from the offshore gaming sector which helped fuel the market’s growth from 2017 to 2019.

Colliers believes that developers should be guided by the interest rate environment and future adjustments should have an impact on the promotions and payment schemes they will implement for the remainder of the year.

Given the compressing yields in the market, property firms should also continue highlighting the capital appreciation potential of condominium units, especially those located in masterplanned communities. Developers should zero in on the residential units’ viability as a hedge against inflation.

In our view, developers should also explore the viability of launching more horizontal projects outside Metro Manila. As I previously noted, there is a strong end-user market outside of Metro Manila and developers are definitely banking on this demand. Hence, we are likely to see more masterplanned and horizontal projects in the provinces moving forward.

The country’s inflation rate is decelerating but the central bank noted that it is unlikely to cut interest rates for the remainder of 2023.

Colliers believes that developers and investors need to constantly monitor inflation and interest rate changes and these indicators’ eventual impact on mortgage rates. Interest rates remain at 6.25% as of June 2023 while average mortgage rates increased to 8.1% in Q2 2023 from 7.3% a year ago and from 7.4% in 2020.

Colliers encourages investors to proactively monitor interest and mortgage rates, particularly as these strongly influence the viability of condominium as a residential investment. Interest rates should guide developers with their promos and payment schemes and if it is already necessary for developers to revisit their rates, promos and payment schemes to reignite interest from investors and end-users.


Joey Roi Bondoc is the research director at Colliers Philippines.