COLLIERS International expects rents to decline by 1 percent to 3 percent in the next few months until 2020, depressed by market competition as alternative locations become viable for condominium projects.
Lack of land to develop in Central Business Districts (CBDs) across Metro Manila has pushed developers to launch projects outside CBDs. In fact, almost 86 percent of the 28 buildings launched for sale in the first half of the year may be found in alternative locations such as San Juan, Parañaque, Pasig, Fairview, Las Piñas, and South Manila.
“There’s not enough land left … That’s why a lot of the developers are trying to recreate that CBD feel outside—the likes of Vertis, Eton Centris, Megaworld … they’re all doing smaller satellite cities because it is difficult to get plots in the traditional (locations). They’re now trying to go into different locations. Developers are now going outside” Colliers Philippines Deputy Managing Director Richard Raymundo said in a briefing on Thursday.
The growing vacancy rates across submarkets also contribute to the gradual drop in rent prices. As 2,300 units in the second quarter of the year add to the total stock of 96,000 units in CBDs, the overall vacancy stood at 10.9 percent as of end-June.
The vacancy across the CBD submarkets will likely rise in the next 12 months, with the overall vacancy to hover between 11 percent and 11.5 percent. In 2018, vacancy is expected to reach 16 percent, given the upcoming supply, before moving back to the 10 percent range in 2019 and 2020, according to Colliers.
Meanwhile, total take-up across Metro Manila rose by 18 percent to 23,000 units in the first half of 2017 from a year earlier, of which 89 percent were in areas outside major CBDs.
Majority or 45 percent of the take-up also came from affordable and economic segments or those priced at P3.2 million and below per unit. The mid-income segment, priced between P3.2 million and P6 million, followed with 38 percent, and the upscale/luxury category account for 17 percent.
The proposed tax reform removing the value added tax exemption on low-cost housing will impact the affordable and mid-income housing segment, Colliers noted, “but we also see developers responding by extending the payment terms to make it easier for the buyers to pay. That’s how we see it happening, moving forward.”
Colliers urged developers to take advantage of the rising demand in affordable and mid-income units by building projects catering to the segment, and offering lifestyle-oriented amenities, unique retail options, and recreational elements to attract buyers.
Potential buyers, investors, and tenants, on the other hand, are advised to consider areas outside CBDs for competitive rents and prices.