Condominium vacancy rates across Metro Manila’s central business districts rose in the second quarter and will likely pick up further in the next 12 months with new supply — mainly in Manila Bay Area and Fort Bonifacio — still outpacing demand, according to the latest report by property consultant Colliers International.
The consequence: Rental prices fell and capital values are plateauing.
Vacancy rates at the metro’s high-end condos stood at 10.9% at end June, Colliers said in its quarterly report on the residential market. It said it expects vacancy rate to “hover between 11.0% and 11.5%” in the next 12 months.
“The double-digit vacancy rates in these submarkets are not surprising considering the size of available stock in these locations,” Colliers said in the report, showing that Metro Manila’s total stock is now at 96,000 units with the addition of 2,300 units during the quarter.
Colliers put the number of new supply at 16,100 for the entire 2017, outpacing the 7,500 units it projects “to be absorbed within the year.”
“For 2018 to 2020, we expect at least 8,000 units of net take-up annually,” read the report, while supply continued to be more than that demand: 20,000 new units for 2018 and 8,000 units the year after.
“The majority of the new supply will come from Manila Bay and Fort Bonifacio,” it added.
Fort Bonifacio in Taguig showed the highest vacancy rate at 14%, followed by Makati at 12.7% in the second quarter. In the first quarter, residential vacancy rates were 12% and 11% for Fort Bonifacio and Makati, respectively.
High vacancy rates put a damper on rental prices and capital values.
For instance, average rentals for prime three-bedroom units have been dropping by 0.7% to 3% every quarter in the last 12 months, Colliers said.
At Rockwell Center where condominium units can be rented out at P891 per square meter per month, rates have gone down by 2.11% quarter on quarter and by 0.67% from a year ago.
Selling prices of condominiums rose but at a slower pace, suggesting capital values are reaching a plateau. Prices of prime three-bedroom units in Makati CBD rose by 3.1% for the quarter, slower than the 3.2% in the first quarter. Condo price increases at Fort Bonifacio slowed to 0.2% in the second quarter from first quarter’s 2.7%.
Developments outside the major CBDs including San Juan, Paranaque, Pasig, Las Piñas, and South Manila are dampening rental prices.
“The growth in these alternative locations has also impacted the rental and selling markets in major CBDs as it provides more options for tenants and buyers, tempering rents and growth in capital values growth in CBDs,” Colliers said.
Total take-up in Metro Manila during the first half was recorded at 23,000, 89% of these are located outside the major CBDs. Nearly half of that number are under the mid-income segment priced at an average of P3.2 million per unit, while 38% are units priced at an average of P6 million each. Upscale and luxury units comprised the remaining 17%.
“As a result, residential yields have been declining. Nonetheless, Philippine yields remain attractive relative to Asian peers,” Colliers said.
Compared with other Asian countries, the Philippines showed the second highest residential rental yield at 5.5%, behind Vietnam’s 5.7%.
Indonesia (4.2%), Thailand (3.5%), and Singapore (2.1%) rounded out the top five markets with the most attractive residential rental yields.
“Furthermore, the low interest rate environment and favorable payment terms available have encouraged many to invest in condominiums,” Colliers said. — ABF