Mixed movements
ON THE final working day of 2016, Bangko Sentral ng Pilipinas ( BSP) revealed that real estate prices in the country throughout the third quarter rose 2.2% as the residential real estate price index, or RREPI, went up from 111 to 113.4.
The upsurge, however, was down from the 11.3% increase during the preceding quarter.
The three property types with prices climbing the most were townhouses (4.9%), condominium units (3.1%) and single detached housing units (2.4%).
RREPI measures the average changes in prices of different types of housing units (single detached/attached house, duplex, condominium and townhouse) over a period of time across geographical areas ( National Capital Region or NCR, and Areas Outside the National Capital Region or AONCR).
It is estimated by BSP every quarter using the Residential Real Estate Loans reports required of 105 banks nationwide. For the third quarter of 2016, 102 banks complied with BSP’s requirement.
“Residential real property prices rose in AONCR by 4.9 percent but declined marginally in NCR by 0.2 percent in Q3 2016,” BSP said in a statement.
“This is due mainly to the faster rate of increase in prices of single detached housing units and townhouses in AONCR compared to those of NCR. Meanwhile, the prices of condominium units increased in both NCR and AONCR.”
BSP found that about seven in 10 real estate loans were used to purchase new housing units. In AONCR, the most common acquisitions were single- detached houses, while in NCR, condominium units were the most popular.
Last month, Colliers International Philippines released its quarterly residential report, noting that the pre- selling take-up of condominium units picked up after four consecutive years of decline, with total takeup for 2016 reaching 38,800 units.
“Take-up has been strong across unit sizes as previous years’ launches are also sold,” the real estate services firm said, attributing this to the favorable interest rate environment which still encourages buyers to acquire condominium units.
However, the firm reported that the secondary residential market of Metro Manila take-up was soft amid the influx of new supply across submarkets. Take-up in 2016 only amounted to 2,000 units, which, the firm pointed out, was 70% lower than the take-up in the previous year.
“Developments in fringe locations have become a viable alternative to the expensive projects in the CBDs (central business districts). Fringe area completions in 2016 reached 4,800 units, higher than CBD’s 3,900 units,” Colliers said.
Overall vacancy in Metro Manila stood at 10% in 2016, up 2.2 percentage points from 2015. Colliers expected vacancy to hover between 12% and 16% in the next twelve months due to the delivery of additional 22,800 condominium units.
Vacancies in Makati CBD and Fort Bonifacio might increase to around 16% and 14% respectively as new units get added. In fact, about half of the projected new supply in 2017 is going to be covered by Fort Bonifacio alone. Meanwhile, Ortigas Center will likely have a vacancy rate between 7% to 9% in the next 12 months.
Rental rates for the premium three-bedroom units in Makati CBD declined 1.4% to P837 per square meter a month, and this decrease might persist, Colliers said, at a faster pace, around 5% to 7%, with the completion of new units.
Rental rates in Fort Bonifacio slid 1.5% from P848 per square meter a month to P833, while rents in Rockwell fell 1.3% to P930 per square meter a month.
Colliers said renters are drawn to developments in fringe areas offering discounts of up to 15%. “The units in the fringes serve as halfway houses for millennials and other professionals who opt to live near their place of work during weekdays but go home to their families during weekends. These weekday halfway houses are also more practical for employees working in CBDs as the worsening traffic in Metro Manila only makes their commute to and from work more unbearable,” the firm explained.
Colliers recommended that developers differentiate their projects and cater to particular clientele given the declining occupancies in the secondary residential market. These developers may choose to tap into the workeraccommodation segment as the young workforce seek affordable studio or one-bedroom units, target expatriates with preference for larger two- and three-bedroom units within CBDs or establish their own leasing terms to market to particular clients.
“Given the falling occupancy rates in CBDs, it would [ be] practical for developers with projects under construction within and outside the established business districts to organize their own leasing arms in order to assist their buyers to lease out their units and attain the promised yield,” Colliers said.