THE Philippine economy grew slower than expected in the second quarter of 2023. With the subpar expansion (4.3%), meeting the growth target of at least 6% in 2023 will likely be a challenge.
Colliers Philippines believes that 2022 marked the gradual recovery of the Philippine property after a disruptive period (2020 and 2021). In our view, various property segments have varied degrees of recovery and the government’s pump-priming for the remainder of 2023 will play a crucial role in improving the rebound prospects of office, residential, and hotel sectors.
The Philippine property is recovering but the pace of growth for the remainder of the year is likely to be stifled by dismal economic expansion in the second quarter of 2023. It will be interesting to see how domestic and foreign economic headwinds will shape the Philippine property sector’s growth and evolution beyond 2023.
RESIDENTIAL RENTS, PRICES UP
This year, we expect the completion of 4,920 new residential units before picking up in 2024, where we see the delivery of 9,620 units — the highest new supply since 2019.
By end-2024, Colliers projects Metro Manila’s condominium stock to reach 165,700 units, with the Bay Area likely overtaking Fort Bonifacio as the biggest residential hub in the capital region in terms of condominium supply.
In our view, the slower condominium completion coupled by the improvement in residential leasing will partly ease vacancy in 2023.
We have seen returning expatriates in the country driving take-up in the secondary residential market particularly in Makati CBD, Rockwell Center, Ortigas Center, and Fort Bonifacio. By end-2023, we forecast vacancy to drop to 17.0% from 17.6% in 2022 and this is likely to raise residential rents and prices.
We see the improving business and consumer sentiment, continued inflow of overseas Filipino workers’ remittances, as well as stabilizing interest rates likely supporting pre-selling and secondary residential demand across Metro Manila.
We are seeing an aggressive stance being taken by developers in launching horizontal projects outside Metro Manila. This development path is likely to continue as property firms search for new sites viable for more house-and-lot and lot-only projects.
HOTELS RECOVER AS REVENGE TRAVEL PERSISTS
Latest data from the Department of Tourism showed that international visitors to the country reached 2.7 million as of the first half of 2023, up 232% from the 814,141 foreign arrivals in the first half of 2022.
The Tourism department expects tourist arrivals to reach 4.8 million in 2023. In 2019, foreign arrivals in the country reached a record high of 8.3 million.
As of the end of the first half of 2023, average hotel occupancy in the capital region reached 61%, up from 55% in the first half of 2022 and 25% in the first half of 2020. Colliers expects hotel occupancy to breach 65% by the end of 2023 partly driven by holiday spending as well as increased meetings, incentives, conferences and exhibitions (MICE) activities.
The entry of more foreign visitors should further propel hotel occupancy across the Philippines, providing impetus for developers to expand their leisure foothold across the country.
In the first half of 2023, average daily rates (ADRs) grew by 5.2%. Five-star hotels continued to record the fastest growth in ADRs, indicative of the return of business travelers and in-person MICE events. Colliers retains its forecast of a 6% ADR growth in 2023. We believe that growth in ADRs in 2023 is likely to be tempered by the substantial number of hotel rooms due for completion in the second half of 2023.
Joey Roi Bondoc is the research director for Colliers Philippines.