Residential property and real estate in the Philippines, and servicing the estimated demand for housing of 5.5 million for this year, or even just a small portion of it, is a key driver of growth according to the latest research report from Pinnacle Real Estate Consulting Services.
Supply-wise, the highest number of approved license to sell is just a little over 200,000 housing units per year. Left unchecked, the housing backlog is steadily increasing every year.
This is the reason why real estate developers have been targeting delivery of one million housing units to reverse the trend of the widening gap between undersupply and increasing demand.
The perception of too much supply is due to the brisk development of mid-market residential condominium buildings in Metro Manila.
Pinnacle, in its residential property sector of the full report, commented that some may be baffled why the top players like Ayala, DMCI, Filinvest, Lopez/Rockwell, Megaworld, Metrobank, Robinsons, SM, and Vista Land Groups are continuously building. This is so because they are successful in selling their products.
Competing against these players for the same market segment is not advisable, said Pinnacle, since they have the marketing and financial clout to build, sell and deliver their projects.
It is important to note the projections of the Housing and Urban Development Coordinating Council (HUDCC) of the annual increase in demand. While this projection is up for revision in the light of the recent Census of Population and Housing and the Family Income and Expenditure Survey, it is national and regional presentation is helpful in assessing the demand for housing.
In the past years, most developers have been offering developments in Metro Manila. At present, most top developers and even the second-tier developers are targeting other regions, especially the highly urbanizing regions, since competition in Metro Manila has been tighter in recent quarters, and land prices have been soaring.
The mass-housing 8990 Group is targeting the affordable segment and building outside of Metro Manila as well. It is launching some 14 new projects all over the country this year with a total of 12,453 housing units, where 46 percent would come from Luzon, 30 percent from the Visayas, and 24 percent from Mindanao.
Another under-served demand in the residential market is the high-end segment. Unlike the price conscious mid-market segment, the high-end and luxury residential property market is price resilient. Expatriates working in the Philippines, high caliber local executives, and discerning overseas Filipinos who experienced luxury amenities abroad are all looking for facilities and services that suit their tastes and whims, and are willing to pay higher costs.
Low density and exclusivity is paramount to these buyers/occupiers. Security is also very important so that buyers/occupiers can avoid noisy neighbors and unwanted visitors. Often times, these luxury high-end condominium projects are secluded, quiet and away from the bustling noise of the central business district (CBD), even when they are in the middle of the CBD.
Another trend is offering quality service like concierge/butler/valet services similar to a hotel. One project, The Residences at Alphaland Makati Place, has even raised the bar of amenities and services and incorporated The City Club in this high-end development. It is not only offering quality service, the full complement of clubbing is available.
It is not only Makati and BGC that are seeing high-end residential property products. Even the low-density City of San Juan is now seeing high-end condominium products. One86 at Wilson is 32-unit, 10-storey residential property project along Wilson St. that is bragging to be an extension of Greenhills. It is offering only four units per floor, tight security, and will provide services like valet and concierge to assist buyers and tenants alike.
Given the level of real estate development, the Bangko Sentral ng Pilipinas recently launched its residential real estate property index (RREPI) to evaluate housing developments and prices.
Based on its three-quarter monitoring, housing prices increased by 9.2 percent. This increase is said to represents a vibrant housing industry in the Philippines that is confirmed by the trends in consumer prices and the recent result of the consumer expectation survey. Asset price inflation is quite remote because it is driven by robust demand, not oversupply according to BSP.
Apart from brisk buying, one way of assessing the residential property market is through the rental market. Rents of residential condominiums have been generally stable, given the wide range of options in the market.
Luxury condominium units command the highest rents that plateaued at PHP 1,000 per sqm per month, or PHP 300,000 per month-level for big units of 300 sqm. The typical rental range for luxury two-bedroom and three-bedroom units is between PHP 120,000 to PHP 250,000 depending on the size, location and furnishing.
For the luxury and high-end segment, there are limited choices for rent. Leasing of studio and one-bedroom units is stable and still ranges between PHP 15,000 to PHP 30,000, and may reach the PHP 50,000 per month-level, depending on the location, furnishing and amenities of the condominium building.
Pinnacle noted that it would be worthwhile to monitor the rents of one-bedroom and studio units to evaluate the yields of these “investment units.”
One maverick group that is maximizing the rental market is the JNJ Summithill Group. It is successful in servicing a market niche, building “dormitels” near major universities. Its first project is the “Upad” in the vicinity of De La Salle University-College of St. Benilde and St. Scholastica’s College offering rooms that can be shared by two, three, four or even six students. Professionals are welcome and can opt to lease one room for himself/herself alone.
Apart from very plush room amenities, Upad has a gym and a pool supporting the healthy lifestyle of the young students and professionals or “millennials”. The building is practically 100 percent occupied. It is now finishing its second project is along P. Campa St. in Manila City, which is very close to the University of Sto. Tomas, and is already almost completely leased.
Growth in the selling and leasing of residential units will continue to provide shelter to the population.
This process would provide profit to the developers while bridging the gap with the demand and housing supply.
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