THE country’s residential property market is expected to soften in the coming quarters because of the large amount of incoming supply, which will put downward pressure on rental rates.
“With the delivery of additional condominium units over the next 12 months, rental rates in Fort Bonifacio are projected to decline by 2 percent,” property consulting firm Colliers International said in a report.
Rental rates in the Makati CBD (Central Business District), which will account for about 30 percent of the additional units this year, will decline by 3.2 percent, while Ortigas Center rents are projected to drop by 2.7 percent over the next 12 months, according to Colliers.
The report said a decrease in rental rates was already seen in the first three months of the year, with rental rates in the Makati CBD dropping 0.5 percent to P958 per square meter from P963 and Fort Bonifacio with a 2 percent decline to P873 per square meter from P891.
“Rents in Fort Bonifacio posted the biggest decline during the period under review,” Colliers said.
In contrast, rental rates in the Ortigas CBD picked up in the first quarter of the year, inching up by 2 percent to P516 per square meter from P506. This was due to the strong take-up of units in the area.
In a separate report by Jones Lang Lasalle, it was noted that a large amount of residential supply is set to enter the market this year, with around 2,500 residential units expected to come online in the second quarter of the year alone.
This is mainly due to the completion of eight residential developments, according to JLL.
In the first quarter of 2016, JLL said three residential buildings were completed, adding a total of 1,805 units to the existing residential stock. The completed developments include the Lerato Tower 1 and Alphaland Makati Place, both in the Makati CBD, and Park West located in Bonifacio Global City.
JLL noted that developers are slowing down on their project launches due to the supply expected to enter the market.
“It has been observed that property developers are slowing new residential project launches in the middle- to high-end segments this year in order to address an overhang in residential supply,” JLL said. “The incoming addition to residential stock will likely put further upward pressure on vacancy rates.”
Besides the expected drop in rental rates, JLL noted that the low oil prices in the Middle East may take a toll on demand for mid-range residential products by overseas Filipinos if it persists.
“Demand for mid-end products by overseas Filipino workers in the Middle East may slow if oil prices remain low,” JLL said. “Nevertheless, demand for high-end/luxury residential products should still register steady growth in the next 12 months, as the economy is poised to perform better than last year, according to forecasts.”