The rental market is providing a “band-aid” solution to the decline in residential sales, as developers start to recognize the potential for-rent market that caters mostly to BPO workers, according to a real estate analyst.
In a recent interview, Colliers International director for research and advisory Julius Guevara told reporters that there is a huge potential in the rental residential market, particularly in “worker housing” which caters mostly to the employees of the Business Process Outsourcing (BPO) sector who live far from their workplace.
“Actually what we’re seeing right now would be worker housing, which is for rent, especially in the fringes. So that is a need that is found not only in Metro Manila but in all cities where you find BPO,” Guevara said.
Guevara noted that the rental market is something that more developers should explore, especially with the rise in vacancies due to unsold units.
“The rental market should be explored. We’re actually doing a study right now for SHDA (Subdivision and Housing Developers Association), that would be looking into that, particularly for the BPO market.”
Guevarra added that this may also help address the country’s housing backlog, which is seen to hit 5.7 million at the end of the year, according to data from the Housing and Urban Development Coordinating Council (HUDCC).
“Homebuilding for sale is not the only option, we have to recognize that. Over 40 percent of the people living in the Philippines rent,” Guevara noted.
Guevara pointed out that developers have noticed the trend toward the rental market, as a few smaller developers have already entered the worker housing development.
“I think that would be a trend right now, especially with the decline in sales. Developers are taking note of it. They know that abroad, the multi-family sector, which is basically for rent, is very huge in the developed economies. I think they’re going to think about that,” Guevara said.
One developer who has observed the worker’s housing trend is Anchor Land Holdings Inc., which recently announced plans to cater to the mobile employees and students with its urban dwellings project. The firm noted that it targets up to 10,000 bedspaces of branded urban dwellings in the next five years.
Also, local dormitory builder My Town reported that it aims to reach an inventory of 6,000 bedspaces by 2018, as it is driven by the demand from the BPO market.
Guevara affirmed the demand for bedspaces or for-rent properties, mostly coming from the BPO sector.
“Yes, especially for workforce housing, BPO workers, they usually live in the fringe areas and their cost for commuting is very high so it’s almost equivalent to the rent. So rather than commuting all the way, spending two hours on their way to their homes, they would now choose to live in affordable housing. But it is of high-quality. Parang mga condo standard,” Guevara said.
In an earlier interview, Lamudi Philippines managing director Jacqueline Van den Ende noted a growing interest in for-rent properties over for-sale homes.
“[Most] BPO workers are renting. The average salary is P23,000. You can’t really spend P7,000- P8,000 [a month]on amortization so you can’t really buy a house. So people rent,” Van den Ende said.
Van den Ende noted that increased vacancies are pushing rental rates down, which makes renting a property more attractive than buying one.
According to a report by Colliers International, residential rental rates in the major business districts such as Makati CBD and The Fort dropped 1.2 percent and 1.5 percent, respectively, in the second quarter of 2016.
It expects rental rates in the two business districts, along with Ortigas Center, to post 4 to 7 percent declines in the next 12 months.
“With these trends, condominium investors whose units are now being completed face a very challenging rental market environment,” Colliers said. “In order to assist their unit buyers in achieving their expected rental yields, residential condominium developers should explore creative rental models.”