Condominium demand still healthy
Malaya by Albert Castro, 10-02-2014
Despite fears of a bubble in the residential property market
as many developers continuously build condominium projects to
satisfy perceived demand, the residential market remains strong,
Claro Cordero, Jones Lang LaSalle head of research, said the
economic fundamentals of the country support the robustness of the
residential property market.
Cordero said some fear of a bubble due to the volume of new
supply that is expected to be completed over the next couple
"For the past five years, in Metro Manila alone, the
average number of residential condominium units completed in a
quarter was approximately 6,000 units, while there are over 8,000
units that are expected to be ready per quarter over the next five
years," he said.
"This quarterly supply of new residential condominium units
far exceeds the 10-year (2003-13) historical average of 600 units
per quarter. To the naysayers, the future stream of completions is
a product of the excessively hyped demand over the past few years,"
But Cordero noted that demand for residential units is
driven by the improving spending power of urbanites, fuelled by
remittances from overseas Filipinos (OFs) and the proliferation of
the offshoring and outsourcing (O&O) industry which employ a
growing number of professional and skilled workers.
Cordero said in the second quarter of the year, the Consumer
Expectations Survey conducted by the Bangko Sentral ng Pilipinas
shows that the allocation of OF remittances for the purchase of
residential developments remains strong.
"The consumer outlook has also improved because household
income has risen on the back of higher salaries and an increase in
the number of employed persons within each household," he
"Moreover, in the first half of 2014, OF remittances grew by
6.2 percent year-on-year to $12.7 billion. Revenue from the O&O
industry is expected to grow to $18 billion with more than a
million full-time employees (FTEs) by end-2104 from the $15.5
billion and approximately 900,00 FTEs in 2013," Cordero
Cordero said that with OF remittances and the O&O industry
on an upward trajectory, "demand for residential developments,
particularly in the residential condominium sector, is expected to
As the demand for skilled Filipino labor, both within and
outside the Philippines, consistently increases, "we can expect the
need for housing and accommodation, particularly those upgrading in
the major urban cities, to remain strong," Cordero said.
"Nonetheless, it is no surprise to expect also a growing buzz
among those who are waiting for a crisis to unfold," he said.
KMC MAG Group, Inc., an international associate of UK-based
property consultancy group Savills, said the Philippine residential
market continues to grow "at a steady rate."
"Middle-income and low-cost demand in Metro Manila keep the
market demand buoyant and occupancy levels high, while slower
growth has been observed in high-end segments," it
KMC MAG said the residential supply is expected to peak this
coming year, balanced by the underlying backlog of housing to keep
market sentiment positive for investors in the low- to mid- price
"As condominium production is shifting towards the
middle-income market, the investor profile remains widely varied.
Along with end-users, the bulk of buyers of middle-income units
consist of wealthy locals and OFWs whose priority is to invest in
their own units," it said.
"Meanwhile, overseas interest remains strong as Metro Manila
offers more attractive yields than other cities in the region.
Also, the cooling measures in traditional markets like Hong Kong
and Singapore have accelerated the overseas demand into new
heights," it added.
But the property consultancy company noted that foreign
investors "still prefer the luxury segments as the prices are
relatively low compared to their home countries."
"Residential yields remained at 7.8 percent in the second
quarter of 2014; however, total return slightly decreased due to
slowing value appreciation," KMC MAG said.
The company said its database shows that the capital
values increased 4.3 percent year on year while rental rates grew
"This slight slowdown of the market is mainly explained by the
supply factors, while residential rates are expected to increase at
a moderate rate," it added.