Condo prices about to go down? Not yet, says Colliers
The real estate sector may only feel the impact of the recent interest rate cuts by the middle of next year as mortgage rates remain elevated in Metro Manila, according to property investment management firm Colliers Philippines.
Speaking to reporters last week, Colliers research director Joey Bondoc said land values across the capital region were still high, making it difficult for developers to impose lower prices for preselling residential units.
Makati Central Business District remains the most expensive place to live in with land values averaging P967,300 per square meter, Colliers data show. This means that a 25-sq-m studio unit may cost around P24.2 million.
Land value at Fort Bonifacio in Taguig is at around P884,500, while Ortigas Center’s is at P389,000. Manila Bay area is at approximately P372,500.
“What developers have been doing for residential units to still look attractive [is] they impose a lower reservation fee and a longer down payment term,” Bondoc said on the sidelines of an EastWest Bank-Filinvest economic forum.
The Bangko Sentral ng Pilipinas has so far slashed the benchmark interest rate twice this year, for a total of 50 basis points to 6 percent. This generally sends a good signal to the real estate sector due to lower borrowing costs, encouraging prospective homeowners to get loans to buy property.
However, Bondoc said the average mortgage rate in Metro Manila was currently at 8.3 percent. This refers to the interest charged by banks when lending money for mortgage payments. Apart from high land values in Metro Manila, rates remained elevated mainly due to high construction material and labor costs, he added.
“It won’t make sense to impose a much lower price in the preselling sector,” Bondoc noted.
In its latest property market report, Colliers found that there were 21,200 unsold units in the region—equivalent to P130 billion worth of inventory—with 38 percent coming from the lower mid-income segment. Units in this segment cost around P3.6 million to P6.9 million.
Unsold luxury units, or those priced at P20 million and above, only comprise 3 percent of the total pie of unoccupied units. As a result, 60 percent of new project launches so far this year are in the luxury segment, which is not as sensitive to interest and mortgage rate spikes as the middle income segment.
According to Bondoc, it would take around five years before these unoccupied units are sold. Still, he said rate cuts could still stoke demand in the residential sector, “especially if that translates to lower mortgage rates.”
