Philippine property’s recovery enablers
(Conclusion)
Last week, I discussed the real picture behind the condominium oversupply, noting that certain developers, business districts, and price segments are doing relatively better than others.
This week, let me discuss the factors that will play a
crucial role in revivifying the Philippine property market, especially the residential segment that has seen challenges since the pandemic and the exodus of Philippine offshore gaming operators (Pogo).
One of Southeast Asia’s economic bright spots
The Philippine economy grew by 5.2 percent in Q3 2024. While this is slower than the 6.4 percent in Q2 2024 and the 6 percent expansion a year ago, the country remains one of the fastest growing Asian economies in the said period, next to Vietnam’s 7.4 percent.
Multilateral agencies are confident that the Philippines will remain one of the fastest growing economies in the region in 2025. Market optimism is strong, driven by the country’s demographic advantage—a young workforce employed in outsourcing and deployed for overseas work.
Colliers is positive that a relatively accelerated growth in Q4 will have a positive impact on office, retail, residential, hotel, and industrial segments.
Low interest rates to stoke demand
The Metro Manila pre-selling condominium market continues to see challenges.
In 2023, only 23,400 condo units were sold while about 25,500 units were launched. In 9M 2024, only 8,000 units were launched, and 9,300 units were pre-sold. Tepid launches and take-up characterize the pre-selling residential market in Metro Manila.
Given the pre-selling figures, we are likely to post
record low launches and take-up this year. The lengthened remaining inventory life—estimated to be six years’ worth, much longer than the average of 12 months annually from 2017 to 2019—is worsened by elevated mortgage rates, high prices of construction materials, and surging land values in major business districts.
Colliers believes that the rate cut should play a key role in infusing much needed confidence into the Metro Manila pre-selling sector.
OFW remittances remain robust
Filipinos continue to be deployed for overseas employment. More than 90 percent are from Central Luzon, Calabarzon, Central Visayas,
Western Visayas, Davao Region, and Northern Mindanao.
Overseas Filipino workers continue to fuel residential demand across the Philippines, with the affordable to lower mid-income segment (P2.5 million to P7 million a unit) being the ‘sweet spot’ for OFW demand.
With cash remittances projected to rise by 3 percent in 2025 to $39 billion, Colliers is optimistic that OFWs will continue to be a major plank of residential demand within and outside Metro Manila.
Attractive promos, payment schemes
Colliers believes that developers and investors need to constantly monitor inflation and interest rate changes and their eventual impact on mortgage rates.
Interest rates have dropped to 5.75 percent as of December 2024 while average mortgage rates increased to 7.7 percent in Q4 2024 from 7.4 percent in 2020.
Developers should align their promos and payment schemes with interest rate trends to reignite interest for condominium units.
Colliers recommends aggressive offers, given the significant number of RFO units in Metro Manila. Some projects now offer extended downpayment terms of up to 84 months, making ownership more accessible. Flexible payment options and potential rate cuts could further boost investor and end-user interest.
Among the competitive RFO promos in the market include up to 40 percent discount on total contract prices (TCPs), early move-in, rent-to-own promos, lower lump-sum amount before a buyer can move in, as well as free furniture and kitchen appliances.
Higher priced JV condo projects
In our view, developers planning to launch projects within the upscale to luxury price band should consider joint venture (JV) deals either with local players or foreign developers.
We have seen developers implementing this strategy. These partnerships should be beneficial to property firms with limited landbank as well as to those that intend to offer upscale to luxury and even ultra-luxury residential projects.
As of Q3 2024, Colliers data showed that joint venture luxury projects in Metro Manila have take-up rates of between 62 and 100 percent.
Colliers recommends that property firms to tap into the growing upscale and luxury market by collaborating with foreign developers on high-end projects.
In our view, JVs should help local players differentiate their projects in the market. Developers should emphasize the JV projects’ upscale amenities, integrated development features, topnotch concierge services, and strong potential for capital appreciation, which are important considerations for discerning buyers.
Recently, we’ve seen developers adding topnotch amenities to their luxury condominium projects. These include resort-like pools, well-equipped gyms, yoga facilities, garden gazebos, as well as electric vehicle (EV) charging stations.
Polls a boon to PH property
Colliers Philippines data showed that senatorial and presidential elections raise demand for properties.
We saw this during the elections held in 2010, 2013, 2016, 2019 and the most recent, 2022. It appears that election-related infrastructure spending boosts take-up for residential units across the country.
More details will be disclosed on Feb. 5 at our 2025 Property outlook presentation.
Email the author at joey.bondoc@colliers.com
