Residential rental rates to soften further – Colliers

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RENTAL rates for residential properties in central business districts (CBDs) are likely to decline this year due to expanding supply and the rising attraction of fringe areas, property consultancy Colliers International said.

In Metro Manila, residential rental rates in CBDs declined by 1-1.5 percent in the fourth quarter of 2016, Colliers International Deputy Managing Director Richard Raymundo told reporters during a briefing in Makati City.

“We expect rents to soften in the next 12 months by another 5 percent,” Raymundo said.

Rental rates for a premium three-bedroom unit in the Makati CBD declined by 1.4 percent to P837 per square meter from P847 per sqm in the third quarter.


“With the completion of new units, we expect rental rates in the Makati CBD to drop [by]around five percent to seven percent over the next twelve months,” Colliers said.

In Fort Bonifacio, the rental rates for three-bedroom units slid by 1.5 percent in the fourth quarter to P833 per sqm a month from P848 per sqm year-on-year.

Raymundo said a large chunk of residential supply is slated to enter the market in the coming years. “We’re seeing some weakness in the rental rates because of the supply that’s going to come in the next four years.”

Colliers is forecasting a 54.3 percent surge in new residential stock to 140,061 units in Metro Manila by 2020, from 90,784 units as of end-2016.

On top of the supply factor, colliers noted a growing demand for developments in fringe areas as a more affordable alternative to CBDs.

“Renters are drawn to developments in the fringe areas as these offer a 10 percent to 15 percent discount,” Colliers said.

The demand for fringe areas is coming from millennials and professionals who prefer to have halfway houses close to their place of work during the weekdays, according to Colliers.

The trend has prompted developers to build “satellite communities” in these compact areas, Raymundo noted.

“I think what we’re seeing are satellite communities. You see Vertis in Quezon City. You see Circuit in Makati,” he said.

Last year, projects completed in fringe areas outnumbered completions within the CBDs at 4,800 units against 3,900 units.

Raymundo noted the interest by developers in fringe areas is driven mainly by price factors.

“It’s so expensive. And where can you find large land to develop in Makati? Same with Ortigas. Fort Bonifacio is very expensive now to buy a property,” Raymundo said.

Despite the general decline in rental rates, Raymundo noted property prices in the CBDs have increased in the past quarter. “Prices are still going up because interest rates are still low.”

Capital values for Makati CBD residential properties grew by 2.3 percent to P180,300 per sqm. In Fort Bonifacio, there was a 2.2 percent increase to P163,200 per sqm and prices rose by 1.1 percent in Rockwell.

“We see Makati CBD prices increasing by about 14 percent in the next twelve months while Fort Bonifacio and Rockwell prices will grow by about 8 percent to 10 percent,” Colliers said.

Condominium prices will further increase in the next twelve months, given the high pre-selling volumes in the market.

Pre-selling take-up in residential units rebounded during the fourth quarter after four consecutive years of declines with 38,800 units absorbed by the market through pre-selling.

“Colliers attributes this to the favorable interest rate environment which still encourages buyers to acquire condominiums,” the property services firm said.

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