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, experts said.
Claro Cordero, Jones Lang LaSalle head of research, said the economic fundamentals of the country support therobustness 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 of years.
“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,” Cordero added.
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 said.
“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 added.
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 grow.”
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 said.
KMC MAG said the residential supply is expected to peak this coming year, balanced by the underlying backlog ofhousing to keep market sentiment positive for investors in the low- to mid-price range.
“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 2.3 percent.
“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.