Manila, 09 January 2017 –
Residential condominium developers launched about 1,900 units in 3Q2016, a 50% decline from around 3,800 units in 3Q2015. The drop indicates that developers are holding back from introducing new projects due to oversupply concerns. The pre-selling residential market in Cebu peaked in 3Q2012 following the launch of an estimated 3,900 units.
The new supply was driven by the low-cost category, with about 60% of the new units launched falling under the Economic segment. The rest of the units launched are classified as Mid-income (28%) and Upscale (12%).
Due to continued development of residential projects in Mandaue, Lapu-Lapu, and Cebu City, house and lots have become more expensive resulting in a more aggressive development of affordable condominium units.
Take-up in 3Q2016 increased by a quarter to about 1,300 units from about 1,030 units in 3Q2015. More than half of the total take-up were from the Mid-Income category, followed by the Economic (20%) and the Affordable (16%) segments. The stronger take-up is also attributed to robust international sales of recently-launched projects, including Taft Properties’ Mandani Bay Suites project.
The favorable overall demand from locals is mainly attributed to increasing household incomes driven by OFW remittances. Other factors attributed to stronger take-up during the period are low interest rates; flexible and affordable payment schemes offered by banks and developers; improved accessibility to residential projects especially those inside township projects; and a generally robust macroeconomic environment.
Completions surge 200%
In terms of completion, about 4,000 units were delivered in 3Q2016, a 200% surge from 1,300 units completed in 3Q2015. More than 80% of the completed units are located in Cebu City, while the rest are in Mandaue City (9%) and Lapu-Lapu City (4%). About half of the projects completed fall under the Affordable segment while a third are classified as Mid-Income. The Luxury segment accounted for less than a tenth of all units delivered.
The launch of more affordable condominium units will continue, albeit at a slower pace, as developers scramble to acquire cheap developable land.
Vacancy up 25%
Overall vacancy in Cebu City reached 25%, up from 20% a year ago. The vacancy rate rose due to delivery of a significant number of new condominium units. The demand for larger condominium (two- to three-bedroom units) in Cebu City is partly driven by foreigners residing in major business hubs like Cebu IT Park and Cebu Business Park. Meanwhile, the take-up for studio and one-bedroom units is fueled by the demand from local and foreign investors, BPO employees, and affluent college students from the city and neighboring towns and provinces. Cebu City attracts a lot of students as it is the Central Visayas’ center for academic excellence. Take up in Mandaue and Lapu-Lapu cities are expected to rise over the medium-term given their status as emerging business hubs.
In the medium term, Colliers sees more luxury and leisure condominium developments in Lapu-Lapu City while affordable projects are expected to proliferate in Mandaue City.
Sustained development of leisure projects
Colliers has observed the continued development of residential projects that cater to tourists such as condotels and serviced residences. We see a more robust development of leisure-related projects given the projected increase in tourist arrivals in the city that is attributed to Cebu being a jump-off point to Visayas and Mindanao destinations; the modernization of the Cebu Airport; and the city’s emergence as a key MICE destination outside of Metro Manila. Foreign and domestic arrivals in Cebu reached 3.3 million in 2015 and this is expected to grow by at least a tenth over the next five years.