Quarterly | Manila | 28 July 2022

Build back better

Developers zero in on residential opportunities
amid rising interest rates

Insights & recommendations

Metro Manila’s pre-selling condominium market is likely to be hampered by rising interest rates.
In our view, compressing yields have also been compelling developers to delay condominium
launches in the capital region. Colliers believes that developers are now taking a more cautious
stance as they await the release of the new administration’s economic agenda, including pro-
property reforms, and gauge general consumer sentiment amid rising inflation and interest rates.
The secondary market, meanwhile, is likely to benefit from the return of foreign employees as
well as local firms’ return-to-office mandates. We see this positively influencing prices and rents in
major business districts. To attract potential buyers, we recommend developers offer more
attractive and innovative promos and payment schemes; highlight amenities that will differentiate
their projects and to attract discerning clients; and explore securing green building certification
especially with the growing demand for more sustainable residential projects beyond Covid.

2022–26
Q2 2022 Full Year 2022 Annual Avg
For 2022 Colliers sees the take-up for units
in the secondary market growing by 128%
YOY partly backed by improvement in
Demand consumer and business sentiment, and 1,005 units 9,230 units 6,070 units
firms’ return-to-office mandates.
We project the delivery of 10,100 units by
the end of 2022, up 16% YOY. The Bay Area
will likely account for about 60% of this new 730 units 10,100 units 6,740 units
Supply
supply.
Annual Avg
QOQ/ YOY/ Growth 2021–26/
End Q2 End 2022 End 2026
Rents increased by 0.4% in Q2 2022. The
0.4% +1.2% +2.2%
return of more local and foreign employees
to their offices should support leasing
Rent PHP679 PHP686 PHP752
demand and lift rents 1.2% YOY in 2022.
In Q2 2022, vacancy declined across all
-0.3pp -0.6pp -2.4pp
submarkets except for the Bay Area. We
project vacancy easing to 17.3% by end-2022
Vacancy 17.5% 17.3% 16.0%
after the record-high of 17.9% in 2021.
In Q2 2022, Colliers saw prices increasing at
0.8% +3.2% +2.5%
a faster pace than rents. We expect prices to
Capital grow by 3.2% by the end of 2022 as vacancy
Values/Yields PHP192,440 PHP194,450 PHP212,180
starts to taper off.
Source: Colliers. Note: USD1 to PHP52 as of the end of Q1 2022. Demand represents net take-up in the secondary market (in units). Rent and
capital values are per sq metre and represent Prime and Grade A projects in selected submarkets. †POGO = Philippine Offshore Gaming Operators.

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“The pre-selling condominium market is seeing headwinds including the imposition of
higher interest rates. Despite this, tailwinds such as higher-than-expected economic growth,
improving business and consumer sentiment, and sustained remittances from Filipinos
working abroad are likely to support residential demand for the remainder of 2022. We are
projecting a gradual pick up in condominium launches in Metro Manila while demand for
horizontal projects is likely to be sustained especially in major investment destinations such
as CALABARZON and Central Luzon.
Recommendations
More rent-to-own, early move in promos
Given the subdued residential demand during
the last two years, developers offered attractive
promos and discounts to attract potential buyers
and investors. Common offerings included lower
reservation fees, split or no down payments, and
free furniture, gadgets and appliances such as
air-conditioning units.
In our view, developers should continue to be
aggressive in offering innovative and attractive
promos to re-capture residential demand. Some
developers may opt to offer early move-in
promos or rent-to-own schemes for their Ready-
for-Occupancy (RFO) units. For non-RFO units,
developers may offer extended payment terms
even beyond turnover. These promos should be
highlighted especially for a client base wary of
rising inflation and mortgage rates.
Highlight amenities including open spaces
and activity areas
Colliers saw select developers upgrading their
amenities to differentiate themselves in the
market. Select developers have incorporated
features such as built-in fiber optic internet
connections, videoconferencing areas and
flexible workspaces which are suited for work-
from-home (WFH) or hybrid working
arrangements. We also encourage developers to
highlight amenities such as open spaces and
activity areas.
Explore green building certifications
Developers may also explore green building
certifications such as Leadership in Energy and
Joey Roi Bondoc
Associate Director, Research
Environmental Design (LEED) or Building for
Ecologically Responsive Design Excellence
(BERDE) for their projects. For instance, DMCI is
eyeing to secure green building certifications for
its upcoming project Fortis Residences.1
Arthaland will also launch six mid-rise
condominium buildings in its Sevina Park
township in Laguna. Sevina Park is the country’s
first residential community to achieve LEED
Platinum certification. Colliers believes that
adopting green and sustainable features will play
a crucial role in future-proofing residential
projects.
New supply to grow by 16%
Colliers recorded the completion of 730 units in
Q2 2022, down 67% YOY, following the delivery
of The Imperium at Capitol Commons in Ortigas
CBD and The Levels Burbank Tower in Alabang.
Colliers expects the completion of about 10,100
units in 2022, slightly lower than our initial
projection of 10,500 units due to delays in the
completion of one project.
We see the rising prices of building materials
adversely affecting the launch of new projects.
Data from the Philippine Statistics Authority
(PSA) show that the wholesale price index for
construction materials in Metro Manila increased
by 8.3% in May 2022, a 10-year high.
Growth rate in wholesale prices of
construction materials in Metro Manila,
2011 – May 2022
10%
5%
0%
2021
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2022
May
Source: Bangko Sentral ng Pilipinas
1DMCI Homes to develop upscale condo in Makati
2
 Metro Manila residential stock forecast, end of 2021 and 2024 (units)
End of 2021 End of 2024 % Change
1 Bay Area 30,260 44,140 45.9% 7
2 Alabang 4,880 6,370 30.5%
5
3 Fort Bonifacio 40,320 43,840 8.7%
4 Rockwell Center 5,270 5,830 10.6% 6
4
5 Ortigas Center 18,730 21,760 16.1%
Makati CBD 28,550 29,680
1 3
6 4.0%
7 Araneta City 4,550 5,140 13.0%
Others 9,630 9,630 0.0%
Total 142,190 166,390 17.0%
Note: Google Maps estimated private vehicle travel time to Makati: Bay Area-17 min, Alabang-24 min, Fort Bonifacio-
14 min, Rockwell Center-9 min, Ortigas Center-15 min, Araneta Center-23 min 2

Vacancy to decline across all Inflation rate, 2001 – Q2 2022

submarkets 9%
8%
Colliers recorded overall vacancy in Metro 7%
Manila’s secondary residential market slightly 6%
5%
receding to 17.5% in Q2 2022 from 17.8% a 4%
quarter ago. We saw vacancies dropping across 3%
all submarkets except for the Bay Area, which 2%
1%
covers 21% of total secondary units in Metro 0%
Manila. We expect vacancy to slightly ease to

Q1 2021

Q3 2021

Q1 2022
2001

2003

2005

2007

2009

2011

2013

2015

2017

2019
17.3% by the end of 2022, partly backed by the
return of more local and foreign employees to Source: Bangko Sentral ng Pilipinas
their traditional offices in Metro Manila.
The improvement in consumer and business Developers and investors should also actively
sentiments provides a glint of optimism in the monitor interest rate hikes which will likely affect
residential market that is partly stifled by rising investor and end-user appetite. The central bank
interest rates. The central bank’s latest has raised the benchmark interest rate to 3.25% in
Consumer Expectations Survey show that the July 2022 from 2.0% in 2021. The BSP is planning
percentage of households planning to buy real to raise interest rates by an additional 25 basis
estate increased to 5.6% in Q2 2022 from 3% in points (bps) to 3.5% for the remainder of 2022 to
Q2 2021. Meanwhile, its Q2 2022 Business temper the impacts of rising inflation.2
Expectations Survey revealed that the business
outlook improved to 38.2% during the period Residential Real Estate Price Index (RREPI)
from 35.8% in Q1 2022. growth, 2017 – Q1 2022
Metro Manila business and consumer outlook, 10% 9.4%
2007 – Q2 2022
8%
6.2%
Business Consumer 5.6%
6%
60 3.6%
4% 2.7%
40 2% -0.8%
20
In percent

0%
0
2017

2018

2019

2020

2021

Q1 2022

-2%
Q1 2022
Q2 2022
2014
2007
2008
2009
2010
2011
2012
2013

2015
2016
2017
2018
2019
2020
2021

-20

-40 Source: Bangko Sentral ng Pilipinas

-60
Source: Bangko Sentral ng Pilipinas
2BSP seen raising interest rates anew

3
Rents and prices pick up Overseas Filipino Worker (OFW) remittances,
2001 – 5M 2022 (Philippine pesos)
In Q2 2022, rents in the secondary market 40B
started to pick up by 0.4% QOQ. This is the first 35B
recorded increase in rents after eight 30B
consecutive quarters of decline. Meanwhile, 25B
Colliers also recorded prices increasing by 0.8% 20B
QOQ. We expect rents and prices to rebound by 15B
10B
1.2% and 3.2% respectively in 2022 backed by
5B
economic growth and the office leasing recovery.
0B

2008
2001
2002
2003
2004
2005
2006
2007

2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
5M 2022
Data from BSP’s latest Residential Real Estate
Price Index (RREPI) report show that nationwide
residential property prices increased by 5.6% Source: Bangko Sentral ng Pilipinas

YOY in Q1 2022 from −4.2% in Q1 2021. This

reflects an uptick in the percentage of The central bank’s Consumer Expectations Survey
consumers who prefer to buy real estate during revealed that the percentage of OFW households
the period. that use their remittances to purchase a house
increased to 8.1% in Q2 2022 from 6.4% in Q2
Residential Real Estate Price Index (RREPI)
2021.
growth, by type of housing unit
Percentage of OFW households using their
Q1 2021 Q1 2022 remittances for real estate purchases, 2017 –
30% 25.6% Q2 2022
20.9%
20% 2017 14.2%
14.7%

10%
0.1 2018 10.4%
0.20% 2.5%
2019 9.3%
0%
2020 4.8%
-10%
-0.1
2021 5.2%
-20%
-0.2 Q2 2022 8.1%
-30%
Single Condominium Duplex Townhouse Source: Bangko Sentral ng Pilipinas
Detached Unit

Source: Bangko Sentral ng Pilipinas Historical launches and take-up

The Q1 2022 RREPI report also showed that 47% Launches Take-up
of real estate loans granted were used for the 57K
60,000 53K 54K
purchase of single-detached housing units, 51K 49K
43K
followed by condominium units (38%). 35K
39K 38K
40,000 31K
27K
Colliers believes that the inflow of more
Overseas Filipino Worker (OFW) remittances 20,000 12K 9K
8K
should partly sustain residential demand
0
particularly for horizontal units outside the
2016 2017 2018 2019 2020 2021 H1
capital region that are within the affordable to
2022
mid-income price segments (PHP1.7 million to
Source: Colliers
PHP6.0 million).

4
For further information, please contact:

Joey Bondoc Richard Raymundo

Associate Director | Research | Managing Director | Philippines
Philippines +63 2 8858 9028
+63 2 8858 9057 Richard.Raymundo@colliers.com
Joey.Bondoc@colliers.com

Martin Aguila Brent Respicio

Senior Analyst | Research | Research Analyst | Research |
Philippines Philippines
+63 2 8863 4116 +63 2 8863 4197
Martin.Aguila@colliers.com Brent.Respicio@colliers.com

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