PHL mortgage rates seen steady until mid-2025

Mortgage rates in the Philippine residential sector are expected to remain unchanged until mid-2025 despite the recent rate cut, according to Colliers Philippines.

“We’ll probably see the full effect by mid-2025, and hopefully that results in lower mortgage rates because the average mortgage rate right now is only about 8.3%,” Joey Roi Bondoc, director for research at Colliers Philippines, told reporters a day before the policy meeting of the Bangko Sentral ng Pilipinas (BSP) on Oct. 16.

“That’s still pretty high, and that has been resulting in lower take-up of residential units, especially in Metro Manila,” he added.

The Monetary Board on Oct. 16 cut benchmark interest rates by 25 basis points (bps), as expected, since price pressures remain manageable. This brought its policy rate to 6%.

BSP Governor Eli M. Remolona, Jr. said another 25-bp cut to benchmark rates could be made at the December 19 meeting.

Lower mortgage rates will stimulate the market, increasing the demand for residential units, Mr. Bondoc noted.

He added that the mid-income segment is mostly affected by higher mortgage rates.

“If you look at pre-pandemic, at the time, we were looking at the take-up in the preselling condominium sector of 55,000-58,000 units. Now we’re good at what? 15,000, 20,000 units in a single year,” he said.

Mr. Bondoc said that Philippine offshore gaming operators (POGOs) were once a crucial factor in the demand for condominiums in Metro Manila.

“Because if you’re an OFW (overseas Filipino worker), the most attractive price point is the P2.5 (million) to P7 (million). So that’s affordable to lower mid-income. Given that mortgage rates are still elevated, some OFWs are still not keen on acquiring residential units,” he said.

Due to the elevated mortgage rates, OFWs are wary in terms of buying residential units despite increasing remittances, Mr. Bondoc added.

Meanwhile, economist Bernardo M. Villegas said the Philippines continues to be one of the fastest-growing economies in the Association of Southeast Asian Nations region despite global uncertainties.

“With a projected growth rate of over 6% in the coming years, we are poised to lead in economic resilience and transformation,” he said during a forum.

Mr. Villegas noted that the current administration’s efforts have established a “solid foundation” for inclusive growth, with advancements in infrastructure, investments, and the digital economy set to propel our progress further.

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Source: Business World

The popularity of leisure-oriented developments

The pandemic has highlighted the need for greener, more open spaces. This is a major reason why property firms now offer bigger spaces, whether for condominium or horizontal developments. These projects are classified as upscale and luxury developments based on total contract prices but are among the best-selling projects in the market post-COVID. We expect developers to continue launching similar projects, but the first movers definitely have an advantage.

Colliers Philippines believes that it is imperative for property firms to take advantage of the rising demand for resort-themed projects across the country. For one, these projects are banking on the revival of the Philippine tourism market, which the Marcos administration continues to aggressively promote. The tourism sector remains one of the major job-generating economic sectors of the Philippines, and the government’s emphasis on the sector will substantially benefit developers catering to local and foreign markets.

Leisure-themed developments also benefit from improving connectivity. Major projects in the Cavite-Laguna-Batangas (Calaba) corridor, for instance, are taking advantage of improving access from Metro Manila to Southern Luzon. Hordes of people visit their favorite destinations in the south during weekends and holidays, and the ease of travel has been facilitated by the completion of major public projects, including those connecting cities from north to south Luzon.

IMPROVING CONNECTIVITY AND LEISURE-ORIENTED PROJECTS

The leisure sector stands to benefit from the new and upcoming infrastructure projects. From the modernization and expansion of airports to the upgrading of roads, particularly those that lead to new and exciting tourism spots, Colliers believes that these joint infrastructure implementation efforts between the government and private sector players should help the government accommodate more international tourists and entice long-haul and high-spending ones, especially now that the Philippines intends to attract 7.7 million foreign visitors this year and 12 million in 2028.

The foreign visitors should eventually be enticed to invest in the country, adding a layer of demand to the already strong upscale and luxury markets.

RISING DEMAND POST-COVID

Developers have been taking advantage of the rising demand for resort or leisure-oriented properties outside Metro Manila. These projects were already popular pre-COVID, but the pandemic only highlighted the need for these leisure-themed residential enclaves. Among the developers with leisure-centric properties outside Metro Manila are Brittany Corp., DMCI Homes, Inc., Rockwell Land, Inc., Megaworld Corp., Ayala Land, Inc., Robinsons Land Corp., Cebu Landmasters, Inc., Torre Lorenzo Development Corp., AboitizLand, Inc., Costa del Hamilo, Inc., Landco, Inc., and Damosa Land, Inc., with projects located in Cebu, Davao, Bohol, Palawan, Cavite, and Batangas. These projects remain popular, and Colliers encourages developers to further assess launching similar projects.

COLLIERS SURVEY RESULTS POINT TO THRIVING POPULARITY

A recent Colliers webinar poll showed that Palawan was the most preferred destination of our respondents (45%), followed by Boracay (17%) and Cebu (16%). Both Palawan and Boracay have been awarded as the third and fourth best islands to travel to, according to the Travel + Leisure Luxury Awards Asia Pacific 2024.

Colliers believes that hotel operators should remain active in capturing demand from domestic tourists who are enticed by impulse travel, as well as foreign visitors. Property firms should explore building either hotels or leisure-centric residential enclaves in popular destinations across the Philippines. Among the developers with leisure presence in Palawan are Brittany Corp., Megaworld Corp., Ayala Land, and Sta. Lucia Land.

Meanwhile, among the developers with resort-themed developments in Boracay, Cebu, and Davao are Brittany Corp., Robinsons Land Corp., Rockwell Land, Torre Lorenzo Development Corp., AppleOne Properties, Inc., Ayala Land, Damosa Land, Inc., and Cebu Landmasters.

Colliers believes that the leisure sector will also likely benefit from the new and upcoming public infrastructure projects of the government. The modernization and expansion of airports such as Panglao, Laguindingan, Zamboanga, Ninoy Aquino International Airport (NAIA), and the New Manila International Airport, as well as the development of new roads to emerging tourist destinations, will likely entice more long-haul and high-spending tourists. This should also support the Department of Tourism’s goal of attaining 7.7 million foreign arrivals in 2024 and 12 million in 2028.

Results of our Q2 2024 Residential Survey showed that about 28% of our respondents chose beachfront properties as their next residential investment. Developers have been taking advantage of the rising demand for resort or leisure-oriented properties outside Metro Manila. In our view, these projects will likely remain popular, especially among investors looking for greener and more open spaces. Colliers data showed that these projects have take-up rates of between 40% and 100%, with average prices per square meter ranging from P214,000 to as much as P590,000 ($3,800 to $10,500) as of end-2023.

Among the developers offering resort-themed developments are Brittany Corp., Ayala Land, Rockwell Land, Robinsons Land, Torre Lorenzo Development Corp., Sta. Lucia Land, and DMCI Homes, dispersed across Batangas, Cavite, and Cebu. In our view, the recovery of the country’s travel and tourism sector will also likely lift the demand for these projects.

PHL HOSPITALITY AND FOSTERING INCLUSIVE GROWTH

Colliers believes that public-private partnerships should not just focus on infrastructure development. Greater emphasis should also be provided in propping up the tourism sector and in making sure that it benefits all stakeholders — from hotel owners and operators to retailers of souvenir items. Over the past few years, we have seen the expansion and modernization of airports in Clark and Cebu, and there will be more in the pipeline — New Manila International Airport in Bulacan and the rehabilitation and expansion of the existing NAIA. With tourism as one of the major job-generating sectors of the Philippine economy, there’s so much on the line. That’s why greater public and private participation is needed in buoying the sector, ensuring that public projects are completed as scheduled, and promoting sustainable and inclusive economic growth across the Philippines.

Further growth of Philippine tourism is a win-win for developers and property investors.

Source: Business World

Residential prices expected to rise 2.2% annually through 2026

Residential real estate prices in Metro Manila are projected to increase by 2.2% annually through 2026, reflecting a “flattish recovery” amid the exit of Philippine Offshore Gaming Operators (POGOs), according to Colliers Philippines.

“Prices are likely to revert to pre-pandemic levels in the third quarter of 2029,” Joey Roi Bondoc, director and head of Research at Colliers Philippines, said during a briefing on July 31.

The Philippine residential segment will see elevated vacancies as POGOs are set to vacate the country by year-end, according to consulting firms.

Colliers forecasted that rents are set to grow by 1.6% annually from 2024 up to 2026 and will return to pre-pandemic levels in the second quarter of 2028.

“The growth of residential real estate loans is slowing down. From 2017 to 2019, which was a peak period for residential demand across the Philippines, especially in Metro Manila, demand was partly influenced by POGO demand,” Mr. Bondoc said.

President Ferdinand R. Marcos, Jr. has ordered a total ban on all POGOs due to their ties to illicit activities such as financial scams, money laundering, prostitution, and human trafficking.

Metro Manila central business districts currently have 159,000 condominium units as of the second quarter of 2024.

“Currently, vacancy is at 17.7%. With POGO demand, we’re likely to see that inching up to 25.4% by the end of 2024,” Mr. Bondoc said.

The Metro Manila vacancy rate will reach 24.9% in 2025, he said.

He added that for the Bay Area, where POGO employees and residents are mostly concentrated, vacancy is expected to surge to 55% from the current 28% without POGOs by the end of the year, and 53% in 2025.

Meanwhile, Leechiu Property Consultants, Inc. Founder and Chief Executive Officer David Leechiu said the residential sector’s high-end condominium market will continue to be resilient, but the middle market “will be hurt badly.”

He added that the middle market condominium will become cheaper to rent and will fall even faster and deeper than the office segment.

“I think what used to rent for P600 per square meter will very soon be renting for P300 or P250 per square meter in residential,” Mr. Leechiu said.

POGOs will vacate a million square meters of residential space, he said.

“I think a lot of the consumer sector will also be impacted because these POGOs employ thousands of Filipinos that are local that have to submit their recordings, and then, now, it’s going to be harder,” he added. 

Source: Business World