Metro Manila condo launches fell to lowest level in 5 years

New condominium launches in Metro Manila slumped to a five-year low in the first quarter, as property developers focus on clearing their existing inventory, according to property consultancy firm Leechiu Property Consultants (LPC).

LPC’s latest Philippine Property Market Report showed new condominium launches in Metro Manila plunged by 77% to 1,347 units in the January-to-March period from 5,928 units in the fourth quarter of 2024.

This was also the lowest number of units launched since the 9,392 units in the first quarter of 2020 when the coronavirus disease 2019 (COVID-19) pandemic began.

In a statement, LPC said developers are “focusing on marketing existing inventory, particularly within the midrange segment, before rolling out new projects.”

Leechiu Director for Research and Consultancy Roy Amado L. Golez, Jr. said the drop in new residential condominium projects reflects developers’ lack of confidence in the market.

“The significant number of supply in the market dictates that developers will slow down their launches. But then at the end of the year, we’ll likely see the same blip upwards in terms of total supply,” he said at a media briefing.

LPC data showed a 14% quarter-on-quarter improvement in sales take-up with 6,500 units sold in the first quarter, amid rate cuts by the central bank. However, this was a far cry from the 13,246 units sold in the first quarter of 2020.

The Bangko Sentral ng Pilipinas (BSP) cut rates by 75 basis points in 2024, bringing the key rate to 5.75%. The BSP has signaled it will continue easing this year.

“We’ve seen a good start for the year for the residential market. But we need to move with caution for now due to very recent developments in the world capital markets. For developers, they will need to be more aggressive with their marketing: their promos and payment terms,” Mr. Golez said.

Mr. Golez said buyers should take advantage of “a short window of opportunity to acquire property at favorable terms while supply is not yet at comfortable levels.”

Metro Manila still has an oversupply of condominiums, mainly in the mid-market to upscale segments and in areas outside central business districts that were affected by the government’s ban on Philippine offshore gaming operators (POGO).

As of end-March, LPC data showed Metro Manila had about 81,400 available condo units, which may take 38 months or about three years to be fully sold.

“Most developers, or practically all, are reluctant to decrease prices. But in effect, what they’re trying to do is offer decreased prices by offering discounts as well as extended payment terms,” Mr. Golez said.

Mr. Golez said he expects developers to limit their project launches for the next six months.

“In the next six months, I think these (launches) will remain low, but as take-up improves, I think they will recover, because now, there are only limited launches,” he told BusinessWorld after the briefing.

Meanwhile, the office market saw a 7% year-on-year increase in demand of 355,000 square meters (sq.m.) despite the absence of POGOs and limited government take-up, LPC said.

“The main difference between this quarter and the first quarter of 2024 is the 56% increase in BPO (business process outsourcing) demand coming from specifically one segment, which are the global in-house centers,” Mikko Baranda, LPC director for commercial leasing, told the briefing.

Global in-house centers are involved in healthcare, banking, financial services, and insurance sectors.

“A lot of these companies, and probably also predicated with what’s happening all over the world, are looking at the Philippines again to offshore and outsource work,” Mr. Baranda said, citing foreign companies like JPMorgan keen on growing their footprint in the country.

In the first quarter, lease transactions involving IT-BPOs reached 185,000 sq.m. of office space, while those for traditional offices reached 94,000 sq.m.

The nationwide office vacancy rate stood at 17% in the first quarter. In Metro Manila, the office vacancy rate stood at 16% — with the highest in Taguig at 24% and the lowest in Bonifacio Global City (10%).

For 2025, office net take-up is expected to jump by an annual 16% to 490,000 sq.m.

“The office market in the Philippines continues to show grit in the face of global and local challenges. The IT-BPM sector remains to be a reliable key driver of growth, while traditional office tenants are also increasingly active. With a promising outlook for the rest of the year, we expect resiliency amidst potential headwinds,” Mr. Baranda said.

LPC said a total of 2 million sq.m. is forecast to be added to the Philippine office supply in the next four years.

Meanwhile, the country’s retail market has already recovered from the pandemic.

“The general population has largely come back to the malls, and back to their consumption behavior. Developers are largely confident of the market with 105 malls upcoming nationwide [in the next six years],” Mr. Golez said. 

By developer, SM Prime Holdings, Inc. accounted for 29% of upcoming malls, followed by Robinsons Land Corp. at 28%, and DoubleDragon Corp. at 15%. Other developers expected to launch new malls in the six-year period include Ayala Land, Inc. (10%), Megaworld Corp. (7%), and Rockwell Land Corp. (2%).

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Source: Manila Times

Condominium living further on the rise

Condos are redefining modern living, becoming the new favorite among Filipinos living in the urban jungles of Metro Manila. Much of the reason can be attributed to the rise of mixed-use developments that offer a balanced lifestyle of live, work, and play that is well-suited to the demands of daily life today.

As urban centers grow more congested and land prices soar, developers are responding to the increasing demand for residential spaces that offer not just a place to live, but a lifestyle. This trend is especially evident in major cities like Metro Manila, Cebu, and Davao, where high-rise condominiums are becoming a prominent feature of the skyline.

Leading real estate developers are developing condo projects within townships, providing a complete package of retail shops, hospitals, churches, and offices right near home. Moreover, these developers are elevating the game with resort-themed, smart homes, and eco-friendly buildings, offering high-quality living spaces in bustling cities.

According to professional services firm Colliers, an additional 9,620 new condominium units will complete construction in 2024, marking the largest completion in five years. Approximately two-thirds of these new units will be located in Metro Manila’s Bay Area.

“Given the delivery of sizable number of new condominium units in Metro Manila this year, Colliers encourages developers to continue offering attractive leasing promos especially for local employees that are returning to traditional office setup,” Colliers advised in their Property Market Report in February.

Interestingly, this has also been accompanied by an increase in interest for leisure condominiums outside the metro.

“An increasing number of Filipinos expressed a heightened interest in acquiring second homes, particularly in residential leisure condominiums in Metro Luzon,” property experts Santos Knight Frank wrote in their Philippine Real Estate Outlook for 2024.

“Tagaytay emerged as the favored location for second homes, with Pampanga and Batangas (Laiya and Nasugbu) tailing behind. In April 2023, San Juan, Batangas saw 689,000 domestic travelers, Nasugbu had 268,022, and Tagaytay welcomed 436,508 tourists. These figures emphasize thriving tourism and widespread appeal, but residential selling rates reveal more evident demand, with 42% of units sold in Metro Luzon classified under residential-leisure.”

Meanwhile, Pampanga leads in the Metro Luzon with a selling rate of P126,374/square meter (sq.m.), followed by Tagaytay at P122,500/sq.m. and Laguna at P117,269/sq.m. Bulacan, Cavite, and Laguna exhibit the lowest average unit prices: P3.7 million for Laguna, P2.9 million for Bulacan, and P2.8 million for Cavite.

“The residential real estate sector in the Philippines has demonstrated consistent growth in recent years, and all signs point towards further advancement in 2024. This growth is attributed to several key factors, including the ongoing process of gentrification in nearby provinces, a recalibrated transportation system, and the turnover of new infrastructures, which will greatly improve interconnectivity between provinces and cities,” Anjo Sumait, manager of Residential Services at Santos Knight Frank, said in the report.

“The idea of gentrification in nearby provinces is influencing the real estate landscape, providing opportunities for development and investment outside of traditional urban centers. This presents a promising prospect for both developers and potential homeowners, as it offers the potential for new urban centers to emerge, thereby spreading economic activities and real estate development.”

Convenience at the forefront

One of the primary reasons for the surge in condominium living is the convenience it offers. Modern condominiums, particularly those designed as a mixed-use development, are designed with the needs of urban dwellers in mind, providing amenities that make day-to-day life more comfortable and efficient. These include fitness centers, swimming pools, co-working spaces, and even retail outlets within the building, offering a self-contained lifestyle all without the need of a commute.

Accessibility is another key factor driving the popularity of condominium living. The mixed-use platform is the most practical choice for real estate developers in Metro Manila particularly because of several factors: the problems of traffic congestion, uneven transportation links and facilities, an excessive concentration of economic activity in traditional central business districts, and the cutthroat competition for real estate.

Stand-alone residential developments or commercial operations have inherent disadvantages, particularly if they are not connected to main thoroughfares or train stations. Hence, developers are strategically making their projects in locations that are well-connected to major thoroughfares, business districts, and transportation hubs. This proximity to key areas reduces the daily commute time for residents, allowing them to spend more time on productive and recreational activities.

There is also the matter of the growing preference for homes that require minimal maintenance, as more and more Filipinos enter into the workforce. Condominiums, often with their professional property management services, cater to this need by taking care of upkeep and security, allowing residents to focus on their careers and personal lives.

The pandemic, of course, also played a part in this shift. According to management consultants McKinsey & Company, the hybrid lifestyle — one where remote working and working from home are staple models for many office jobs — is here to stay.

“If we look at neighborhoods which were very office-dominated, the first main impact is simply fewer people in those offices. That, in turn, means fewer people on those streets, fewer people in the shops or just anywhere in the neighborhood. That, combined with the rise of online commerce, is creating a big challenge for those downtown retail spaces and public spaces in those office-intensive areas,” McKinsey Senior Partner Jonathan Woetzel said.

“The other obvious impact is on residential usage. As people are closer to home, we’re seeing demand for those homes rise. And then around those homes there’s a minor resurgence of retail. So we see the shopping and commerce patterns shifting as the people shift.”

Mr. Woetzel added that the residential mixed-use neighborhood is “alive and thriving,” as people have generally kept innovations from the pandemic that proved successful. “That’s a tribute to what people want: this notion of a walkable, livable environment.”

Aditya Sanghvi, senior partner at McKinsey, said, “The neighborhoods that are performing better are the ones that are pedestrian-friendly, that have great green spaces, and have a mix of office, retail, and experiences. They’re sort of an ecosystem of everything that one might want in their life all sort of in one place.”

As urbanization continues to accelerate, the demand for convenient, accessible, and well-designed residential spaces is expected to rise. Condominium living, with its myriad benefits, is well-positioned to meet this demand, reshaping the way Filipinos live in the urban jungle.

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Source: Business World

The Philippine condominium market in review

Over the past decade, condominiums have grown in popularity among Filipinos seeking new homes partly because of their versatility as a residential property and as a potential source of income. As more Filipinos move to Greater Manila and as developers build more projects vertically, the condominium market presents golden opportunities for developers and investors alike.

According to the Bangko Sentral ng Pilipinas (BSP), while real estate prices of various types of new housing units in the Philippines contracted by 3.6% in the fourth quarter of 2023, the market did rise by 6.5% year on year. Although condominium prices also declined by 8.6% in the fourth quarter of 2023, it saw a massive increase of 15.6% in the said quarter and saw a modest 4.1% growth overall for the whole year.

There is also an indication of the steady preference of Filipinos for condominiums as residential property. Data from the BSP suggests that 42.6% of Filipinos utilized their residential real estate loans (RREL) to purchase condominiums, the same percentage as those who bought single houses. Additionally, 14.7% opted for townhouses, while duplexes accounted for a meager 0.1% of the transactions.

Condominiums as second homes near tourist destinations are becoming a trend among homebuyers too. Real estate agency Santos Knight Frank mentions that a growing number of Filipinos are showing heightened interest in acquiring leisure condos outside of Metro Manila with the favored locations for these second homes including areas like Tagaytay, Pampanga, and Batangas.

Colliers’ Property Market Update for 2024 shows that the condominium markets in urban centers in Laguna, Cebu, and Cavite are improving as well with selling rates of P129,700 per square meter (sq.m.), P150,300/sq.m., and P150,400/sq.m., respectively. The same report says that the compound annual growth rate of condominium prices in those areas grew by 11.1% in Laguna, 6.9% in Cebu, and 12.4% in Cavite.

Additionally, Colliers’ Q1 2024 Metro Manila Residential Report suggests that close to 3,000 condo units were purchased in the region’s pre-selling market. This growth in demand was fueled by buyers from the lower and upper mid-income brackets, who collectively comprised nearly half of the total units sold during this timeframe, in areas like Mandaluyong, Quezon City, and Alabang-Las Piñas.

Meanwhile, the same report says that the number of pre-selling condominium launches in Q1 2024 totaled 2,600 units, a 59% decrease compared to the same period in the previous year. A potential reason for this cautiousness by developers may be due to “elevated mortgage rates, continued increase in prices of construction materials, surging land values in Metro Manila, and lengthened remaining inventory life.”

The Philippine condominium market is still a cornerstone for urban living amongst Filipinos looking to move to the metro. As the market ​​adapts to evolving consumer demands and market conditions, developers innovate and expand their portfolios to accommodate more Filipinos and investors. The condominium’s role in Metro Manila as a symbol of urban life is set to endure and shape the future landscape of Philippine real estate.

Source: Business World