While the country has been experiencing interest and inflation rate hikes over the past few months, demand for real estate is expected to increase during the remaining months of 2022.
In their quarterly report, Colliers, a premier national real estate research firm, noted that the economy usually picks up during the latter part of the year due to unexpected economic growth and remittances from Overseas Filipino workers.
“The pre-selling condominium market is seeing headwinds including the imposition of higher interest rates. Despite this, tailwinds such as higher-than-expected economic growth, improving business and consumer sentiment and sustained remittances from Filipinos working abroad are likely to support residential demand for the remainder of the year,” said Joey Roi Bondoc, Collier’s Associate Director for Research.
“We are projecting a gradual pick up in condominium launches in Metro Manila while demand for horizontal projects is likely to be sustained especially in major investment destinations such as CALABARZON and Central Luzon,” Bondoc added.
Attractive promos, discounts
It has been noted that developers have been offering attractive promos and discounts to attract potential buyers and investors. Common offerings included lower reservation fees, split or no downpayments, and free furniture, gadgets, and appliances such as air-conditioning units.
“In our view, developers should continue to be aggressive in offering innovative and attractive promos to re-capture residential demand. Some developers may opt to offer early move-in promos or rent-to-own schemes for their ready-for-occupancy (RFO) units,” Collier said.
“For non-RFO units, developers may offer extended payment terms even beyond turnover. These promos should be highlighted especially for a client base wary of rising inflation and mortgage rates,” it added.
It is also important that developers upgrade their amenities to differentiate themselves in the market. It can be noted that some developers have incorporated features such as built-in fiber optic internet connections, videoconferencing areas and flexible workspaces which are suited for work from home or hybrid working arrangements.
Green certifications
Developers can also explore green building certifications such as Leadership in Energy and Environmental Design (LEED) or Building for Ecologically Responsive Design Excellence (BERDE) for their projects.
“We believe that adopting green and sustainable features will play a crucial role in future-proofing residential projects,” Colliers said.
Colliers noted the completion of 730 units during the second quarter with the completion of properties in Capitol Commons in Ortigas and in Alabang. An additional 10,100 units is expected to be completed by the end of the year.
The rising costs of building materials has adversely affected the launch of new projects. Colliers pointed out that data from the Philippine Statistics Authority indicated that the wholesale price index for construction materials in Meto Manila had increased by 8.3 percent in May 2022, a 10-year high.
Vacancy slightly dropping
In terms of vacancy, Colliers recorded overall vacancy in Metro Manila’s secondary residential market slightly dropped to 17.5 percent in the second quarter from 17.8 percent the previous quarter. Vacancies were seen dropping across all submarkets except for the Bay Area which covers 21 percent of total secondary units in Metro Manila.
“We expect vacancy to slightly ease to 17.3 percent by the end of 2022, partly due to the return of more local and foreign employees to their traditional offices in Metro Manila,” Colliers reported.
While consumer and business sentiments generally improved, this was partly stifled by the rising interest rates. The Bangko Sentral ng Pilipinas’ latest Consumer Expectations Survey show that the percentage of households planning to buy real estate increased to 5.6 percent in the second quarter from three percent during the same period last year.
BSP’s Business Expectations Survey revealed that the business outlook improved to 38.2 percent during the period from 35.8 percent in the first quarter.
Monitor interest rates
Developers and investors were advised to monitor the interest rate as the BSP plans to increase it even further during the remaining months of 2022.
Rents in the secondary market started to pick up in the second quarter by 0.4 percent, the first increase recorded after eight consecutive quarters of decline. Colliers also recorded prices increasing by 0.8 percent. As such, rents and prices are expected to rebound by 1.2 percent and 3.2 percent respectively due to the economic growth and office leasing recovery.
With more companies adopting hybrid working set-ups and co-working arrangements, Crown Asia, a Vista Land company, noted that more companies are looking for more flexible spaces that will act as satellite offices. Colliers predicts that co-working spaces will expand by 10 percent in the next three years.
Real estate growth is also expected in the provinces outside of the National Capital Region because of government infrastructure programs. Colliers said Bulacan is expected to be an attractive residential investment location because of the construction of new highways and the MRT-7. Laguna and Cavite will continue to be top real estate investment locations as well.
Colliers projected that the relaxed travel restrictions in major cities and mainstream vaccination rollout should increase consumer traffic and spending in malls and shopping centers. Because of this, Colliers said retail rates would increase by one percent in the next few months and that more retail spaces would be taken up.
Image credits: DHSUD Website
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The article was originally published in Business Mirror and written by Anne Ruth Dela Cruz.
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