May 29, 2023

The pre-sale market for condos in Metro Manila is recovering

From the market segment, middle-income and luxury projects will probably remain sustainable until the end of 2022.

Metro Manila’s pre-sale housing market is gradually recovering, reflected in the improvement in net occupancy (demand) and project launches (supply).

In terms of supply, the Bay Area continues to dominate and is likely to have the largest inventory through 2024, while local and foreign workers returning to traditional office space will increase demand for rental housing in central business centers. Colliers therefore maintains its forecast of a gradual recovery of apartment rents and prices starting in 2023.

Colliers Philippines believes that developers must continue to introduce attractive flexible payment terms due to the significant number of ready-to-occupy (RFO) units in the market. Stakeholders should continue to monitor interest rates and their impact on mortgage rates. Real estate companies should also continue to evaluate attractive price segments in different parts of Manila as they guide developers in their launches as they maximize the market’s post-pandemic recovery.

Follow interest rate changes

Colliers believes that the higher interest rate set by the central bank will likely lead to an increase in mortgage rates. In September, the Bangko Sentral ng Pilipinas has raised the key interest rate to 4.25 percent from 3.75 percent the previous month to mitigate the effects of inflation. At the same time, the average interest rates on bank mortgages also rose to 7.8 percent in the third quarter from 7.3 percent in the previous quarter.

Colliers encourages investors to actively monitor interest rates and mortgage rates, as they can have a strong impact on the profitability of housing investments. Interest rates should guide developers in campaigns and payment systems.

Evaluate the attractive price segment

In the first nine months, the luxury segment (£8 million and over) accounted for 28 per cent of the total number of dwellings, an improvement from -1.6 per cent in the same period last year. The deployment was boosted by projects in major central business districts (CBDs) such as Fort Bonifacio and Ortigas. Colliers believes the high-end luxury segment is likely to remain resilient as interest rates and mortgage rates rise.

Meanwhile, projects catering to the affordable and middle-income (P1.7 million to P6 million) remain popular, especially in the peripheral areas of Manila North, Quezon City North, and the Camanava (Caloocan-Malabon-Navotas-Valenzuela) corridor.

Adopt competitive leasing and pricing systems for regional fishing organizations

The underutilization of secondary housing still remains above 17 percent. Due to the significant inventory in the aftermarket, developers should be proactive in offering RFO projects early move-in offers and rent-to-own schemes. A few developers even allow buyers to move in with a down payment as low as 5 percent and up to 20 percent off contract prices.

10,100 new apartments in 2022

Colliers delivered 3,714 new units in the third quarter following the completion of the Fort Bonifacio and Bay Area projects. This is the highest measured quarterly completion since the first three months of 2021. Colliers thus maintains the projected delivery of 10,100 units in 2022, as developers’ construction schedules are still within the right limits this year.

Pre-sale pickup

The reception of pre-sold apartment projects was 6,100 apartments in the third quarter, while 5,700 apartments were sold in the second quarter. This brings the total usage for the first nine months of 2022 to 14,900 units, which already exceeds the figures for the whole of 2021. In 2021, we saw an anemic spread in the pre-sale market, with only around 12,400 sold. Colliers believes that housing demand should be supported by improving consumer and business sentiment in Metro Manila.

However, Colliers sees rising interest rates as a headwind for the housing market, as they may affect mortgage rates. The increases in construction costs due to the rise in the prices of imported raw materials also stifle launches for pre-sales in the housing market.

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