Manila, November 12, 2018 – Metro Manila condominium sales remain strong despite higher inflation and the central bank’s decision to raise benchmark yields. Latest sales figures indicate that the residential market is likely to outpace condominium sales in 2017. Colliers believes that a mix of demand from offshore gaming employees and local professionals is helping sustain the Metro Manila residential market, partly driving demand for other segments such as dormitories that cater to professionals and students. In 3Q2018, we have also seen the Manila Bay Area overtaking Ortigas Center in terms of number of condominium units.

As of the first three quarters of 2018, condominium sales in the pre-selling market which covers units that are currently being constructed reached about 42,000 units, higher than the 38,000 units recorded in the same period in 2017. Given the current trend, the 2018 take up for pre-selling condominium units is likely to surpass the 53,000 units sold in Metro Manila in 2017.

For the first nine months of 2018 some 31,000 units were launched compared to 22,600 units in the same period of 2017. The central bank’s decision to raise benchmark yields by 150 basis points so far in 2018 has not deterred developers from launching new projects across Metro Manila.

To seize opportunities in the sector, Colliers recommends that developers pursue more projects in the peripheries of established business districts; tap the rising demand for worker housing; tie up with the government for the skills upgrading of construction workers; push for the entry of 100% foreign-owned contractors; and be more flexible to the residential demand of offshore gaming operators.

Completion of condominium units picks up in 3Q2018

The completion of new condominium projects picked up in 3Q2018, following the delivery of more than 4,800 units. This is more than double the 1,700 units completed in the first six months of the year. Year-to-date (YTD) completion now stands at 6,500. Colliers is optimistic that the projected 9,600 new units for 2018 is likely to be met given the status of residential towers due to be completed in 4Q2018.

Manila Bay Area overtakes Ortigas Center

As of 3Q2018, Colliers recorded a total of 113,700 completed condominium units across Metro Manila’s secondary residential market, which covers major business districts. At present, Fort Bonifacio accounts for the most number of units at 27% of residential stock followed by Makati CBD (23%), Bay Area (16%), and Ortigas Center (15%). Manila Bay has overtaken Ortigas Center starting 3Q2018 and we expect the reclaimed CBD to overtake other established business hubs such as Makati CBD by 2021. By then, Colliers sees the Bay Area having a total of 29,500 units, higher than Makati CBD’s 28,700.

142,000 condominium units by 2021

From 2019 to 2021, we see the completion of about 8,300 new condominium units per year. By 2021, Colliers projects Metro Manila’s secondary residential stock to reach 142,000 units, about 33% higher compared to 2017 total.

Colliers believes that ramped up completion of new condominium units is partly attributable to the relentless demand from offshore gaming firms from China. Fort Bonifacio, Bay Area, and Makati CBD are the three major locations that have been cornering bulk of offshore gaming space transactions since 4Q2016. This strong demand is spilling over to the residential sector as aside from expansive office space, a major requirement of these offshore gaming companies is a residential complement.

Surging demand for worker dormitories

Aside from the demand from offshore gaming employees, Colliers has also observed more local professionals working in CBDs who pool their monthly rent and lease out condominium units located in the peripheries of major business districts such as Makati, Ortigas, and Fort Bonifacio. This is contributing to lower vacancy especially among Grade B condominium towers in the fringe areas.

Hence, Colliers sees more developers investing in worker accommodation projects that cater to young urban professionals who can’t afford to own their own apartment yet or rent a condominium unit within the established business districts. These halfway residential units are for professionals who want to live near their work places. These worker dormitories 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.

In the past, the demand for worker dormitories has primarily been served by smaller, mom-and-pop developers. But national developers such as Ayala Land and the SM Group have started to tap into this opportunistic demand.

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