Metro Manila vacancy rates drop in Q1 — report

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REAL ESTATE consultancy firm Colliers International Philippines allayed concerns of a property “bubble burst” in Metro Manila, citing a dip in vacancy rates in the residential market.

In its first quarter report, Colliers said vacancy rates in Metro Manila went down to 12.4% in the first quarter of 2018, slightly lower than the 12.6% seen in the last quarter of 2017. The Manila Bay Area showed the largest decline in vacancy to 15% from 19%, quarter-on-quarter.

This was attributed to the growing number of Chinese nationals that are choosing to reside in the Bay Area, due to the presence of Philippine Offshore Gaming Operators (POGOs), which employ a significant number of Chinese nationals.

Colliers Senior Researcher Randwil Dinbo U. Macaranas noted that property developers welcome the increased demand from Chinese buyers.

“They’re open to it, it’s additional sales for them. Customers are customers, depending on the types of tenants and buyers that they’d like to attract and suits their brand…From what we’ve seen, there are those that are staying, there are POGO employees, there are also those buying it and then renting it,” Mr. Macaranas said in a recent interview.

The Colliers report noted that only Fort Bonifacio in Taguig City showed an increase in vacancy, after the significant number of new supply completed in the market in 2017. Vacancy in the business district rose to 17.3% in the first quarter of 2018 from 15.7% in the fourth quarter of 2017.

From 2018 to 2021, Colliers expects 39,850 more residential units to be added in Metro Manila, for a total of 143,300 units in the residential condominium stock since 2017. This will lead to an overall vacancy of around 12-16% in the next two to three years.

“The upward pressure on vacancy will be tempered by increased demand from young professionals, expatriates, and Chinese nationals-workers,” Colliers said in its report.

Colliers said that real estate stakeholders have been cautious against a looming bubble burst given the steep increase in prices, record high supply, and stronger demand in recent years.

For instance, the most expensive condominium unit in the metro is priced at P400,000 per square meter, and this is expected to be breached with more upcoming high profile projects. The compounded annual growth rate in the past five years for units in major central business districts span from 5% to 14%, with Makati accelerating at the fastest pace.

In terms of lease rates, average monthly rents in prime three-bedroom units range from P800 to P900 per square meter. The Rockwell area in Makati City and Fort Bonifacio commanded the highest monthly rental rates for the first quarter, at P872 per square meter and P810 per square meter, respectively.

Amid the rising prices, Colliers argued that Metro Manila is not headed for a bubble burst. It noted that construction delays have actually caused a downward adjustment in 2018 supply from 27,000 units to just 12,700 units.

“(This) effectively softens fears of an oversupply. And even at 12,700 units, we expect more delays toward the latter part of the year,” Colliers said.

In addition, it said that vacancy rates in sub-markets of the Makati CBD and Bay Area show that there is real demand for property, rather than speculation.

“Overall, while it appears that a housing bubble burst has not yet occurred at this point, it must be stressed that it is still a very competitive condominium market. The key for developers is to ensure that their projects are meeting the expectations of buyers and tenants, especially amidst still sizeable new upcoming supply,” the company said.