Property firms endure condo glut

The condominium glut in Metro Manila did not stop property firms from being profitable in the first quarter of the year, owing to gains from other businesses, such as malls, offices and hotels.

In its Property Sector report released earlier this month, COL Financial found that profits of property companies grew by an average of 8.7 percent to P30.81 billion.

“Their recurring businesses are also robust, contributing steady growth in malls, offices and hotels,” COL said.

It gave a “BUY” rating to Ayala Land Inc., Megaworld Corp., Robinsons Land Corp., SM Prime Holdings Inc. and Vista Land and Lifescapes Inc., noting these companies had “attractive fundamentals and valuations.” It likewise expects the share price of these developers to outperform the market in the next six to 12 months.

Takeup sales, or money made from selling properties, dipped by 22 percent year-on-year because most developers reported a decline.

According to COL, some companies opted to slow down launches and prioritize selling existing inventory.

“Overall, the residential segment is enduring challenges due to the glut in the middle-income condominium segment, which has resulted in buyers delaying their purchases, knowing there is potential for better deals in the market,” it said.

High mortgage rates

Real estate brokers earlier pointed out that high mortgage rates were among the reasons why the middle-income segment performed poorly.

Those in the upscale and luxury markets, meanwhile, typically do not feel the impact of high rates because of higher income.

As a result, developers opted to offer more lenient payment terms—no required down payment before moving in and longer payment schedules, among others—to attract buyers.

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Still, property firms benefited from gains in their other businesses, offsetting the dismal residential performance.

Robust consumption, higher foot traffic and tenant sales allowed room for growth in retail leasing revenues, which climbed by an average of 6.4 percent to P31.95 billion.

Easing inflation likewise boosted the spending power of consumers, COL noted.

The office segment, meanwhile, saw revenues rise by 10.5 percent to P11.87 billion despite the industry’s challenges.

Hotel revenues, on the other hand, grew by 14.4 percent to P7.56 billion as developers expanded their portfolios.