Developers unable to adjust condo prices as costs remain high

Property Developers in Metro Manila are unable to adjust condominium prices as inflation and supply chain issues keep costs high, according to real estate services firm Cushman & Wakefield.

“Developers are grappling with increased input costs due to persistent global inflation and supply chain issues, exacerbated by geopolitical tensions. These factors hinder their ability to adjust prices quickly, leading to slower sales and impacting revenues,” Claro dG. Cordero, Jr., director and head of research, said in a statement.

The mid-end segment faces a supply-demand mismatch, mainly driven by elevated condominium prices. Buyers also prefer larger units, while available studio types are often less than 25 square meters (sq.m).

Condominium prices dropped by 9.4% year on year, reversing the 8.3% increase recorded last year and the 10.6% rise in the previous quarter, according to the latest data from the Philippine central bank.

“Until a balance is achieved between buyers’ expectations and developers’ pricing, excess inventory in the mid-end residential condominium sector will persist,” Mr. Cordero said.

The Metro Manila market has a total supply of 450,000 mid- and high-end condominium units, with around 8% remaining unsold.

Before the pandemic, the annual average completion rate for residential condominiums was 35,000 units. Over the past five years, it has declined to 25,000 units.

Outside Metro Manila, unsold inventory is lower at 5%, with about 250,000 completed units.

Dominant locations include Metro Cebu at 54%, followed by the Cavite-Laguna-Batangas corridor (24%), Metro Davao (13%), and Metro Iloilo (3%).

In the Metro Manila office market, vacancy rates are expected to stabilize at around 17–18% in 2025, Cushman & Wakefield said.

“Despite the return of office space from POGO (Philippine offshore gaming operators) companies, absorption rates have improved from pandemic lows but remain influenced by flexible work trends and corporate policies. On the other hand, some companies mandating a return to the office are positively impacting demand growth,” it said.

In central business districts (CBDs), average office rentals have declined by 2.9% annually, while rental rates in non-CBDs fell by 4.2%.

“This trend reflects a continued flight to quality, with CBD office developments benefiting from their superior finishes, amenities, and tenant mix,” Cushman & Wakefield said.

It also noted the rise of office spaces in non-CBDs, with 2.9 million sq.m. added outside Makati and Bonifacio Global City in the past decade. This was driven by flexible work trends and developments outside CBDs.

For retail, the property consultant noted an increase in redevelopments of existing spaces, incorporating additional features to enhance the shopping experience. Mid-end and high-end shopping malls have an average annual supply of about 376,000 sq.m., Cushman & Wakefield reported.

In the hotel segment, Cushman & Wakefield cited uneven regional recovery due to the untapped potential of many tourist destinations. It expects 1,600 additional keys in the mid-end and higher-end hotel and serviced residence segments this year.

However, it may take five years to reach the projected 70,000 keys due to construction delays.

Meanwhile, Cushman & Wakefield highlighted rising demand in the logistics and industrial sub-sector, driven by the growth of the digital economy.

However, it emphasized the need to improve the quality of logistics facilities to meet the demands of new occupiers. Challenges in the sector include achieving sustainability targets, clarifying restrictions related to data privacy laws, and addressing the high costs, availability, and viability of support utilities.

“Across all key Philippine real estate sub-sectors, the increased demand for higher-quality, well-located, and resilient developments is significantly shaping the future real estate landscape,” Mr. Cordero said. “Investors and tenants prioritize properties in prime locations with superior amenities and robust infrastructure.”

Source: Manila Times

PHL real estate to soar with major infrastructure projects

The Philippine government’s ambitious infrastructure program is expected to reshape the real estate market, driving up land values and office lease rates, according to analysts.

“Massive public investments in infrastructure should stoke Philippine property, benefiting developers with condominium projects across the country,” Joey Roi Bondoc, director and head of research at property consultancy group Colliers Philippines, said in an interview.

“Buyers of luxury projects will likely gravitate towards residential developments near public infrastructure projects,” he added.

Transport infrastructure projects, such as the Metro Manila Subway, expected to be completed in 2028, are seen to benefit major central business districts (CBDs) like Quezon City, Ortigas, Fort Bonifacio, Pasay, and Valenzuela.

Other projects awaited by property developers include the Mass Rapid Transit (MRT)-7 and 4, the Manila-Clark Railway, the New Manila International Airport in Bulacan, and the Light Rail Transit Cavite Extension Phase 2. The Cavite-Batangas Expressway, the Central Luzon Link Expressway, the Bataan-Cavite Bridge, and the rehabilitation of the Ninoy Aquino International Airport are also in the pipeline.

“Proximity to infrastructure is a normal amenity these days, and developers can command premium prices and rents for properties situated near infra projects,” Mr. Bondoc said.

He noted that from 2016 to 2023, house and lot prices in these regions rose by an average of 3.6 to 7.2% per annum.

Meanwhile, lot-only developments saw price increases of between 6.7% and 15.4% per year during the same period.

For the office market, Mr. Bondoc said the increase in rents and values of properties near new transportation hinges on the attractiveness of locations to tenants and the current vacancy rates.

“Aboitiz InfraCapital’s Economic Estates and Aboitiz Land’s residential communities are strategically positioned to capitalize on the transformative effects of new infrastructure developments,” Aboitiz Land, Inc. said.

Aboitiz InfraCapital, the infrastructure arm of the Aboitiz Group, includes LIMA Estate in Batangas, TARI Estate in Tarlac, West Cebu Estate in Cebu, and the Mactan Economic Zone Processing 2 in Lapu-Lapu City in its roster of economic estates.

The firm said the estates are designed as “industrial-anchored townships” strategically linked to essential infrastructure like major highways, airports, and seaports, ensuring efficient supply chains and strong connectivity.

For example, LIMA Estate is located near the Southern Tagalog Arterial Road (STAR) tollway and will soon benefit from the upcoming Southern Luzon Expressway (SLEX) Toll Road (TR) 4 project, reinforcing its status as Southern Luzon’s leading industrial and business hub.

Similarly, the TARI Estate is accessible through the North Luzon Expressway (NLEX), Subic-Clark-Tarlac Expressway (SCTEX), Tarlac-Pangasinan-La Union Expressway (TPLEX), and Central Luzon Link Expressway (CLLEX).

“Enhanced connectivity through infrastructure projects like the Metro Manila Skyway Stage 3, SLEX TR4, TPLEX, CLLEX, and the NLEX-SLEX Connector Road has significantly boosted demand and property values across our developments,” Aboitiz Land said.

It cited that the 800-hectare LIMA Estate’s location and accessibility have driven growth, with housing developments such as The Villages at Lipa seeing a 145% value appreciation since its launch in 2019.

Masterplanned communities Ajoya Cabanatuan and Ajoya Capas have seen value appreciation of 181% and 86%, respectively, since their launches in 2018, it said.

“Through strategic investments in infrastructure, sustainable housing solutions, and long-term planning, we continue to support locators, property seekers, and communities — ensuring ongoing growth and expansion beyond today’s developments,” the firm said.

The efforts are all aligned with the Build, Better, More agenda, which targets infrastructure investment of 5% to 6% of the country’s gross domestic product, it said.

This infrastructure flagship program is set to roll out 186 infrastructure flagship projects with a combined value of P9.6 trillion, or approximately $163 billion.

Nigel Paul C. Villarete, a senior adviser on public-private partnerships at Libra Konsult, Inc., said that the traditional real estate mantra of “location, location, location” is not entirely accurate. Instead, a more fitting mantra would be “access, access, access,” he said, noting that from a planning perspective, “land use and transport” are inherently linked.

Mr. Villarete also said the infrastructure projects have a “turbocharger” role in promoting sustainable urban growth in the country.

He noted the Cordova-Cebu Link Expressway (CCLEX), which has boosted not only the linked local government units of Cebu City and Cordova but also the entire Metropolitan Cebu and Central Visayas (Region VII) economies.

Meanwhile, DMCI Homes, Inc. President Alfredo R. Austria said building transit-oriented developments (TODs) benefits not only the value of properties but also future residents of housing developments.

“Think about it 10 years or five years from now. You can see the traffic there; that’s a lot of vehicles added every year,” he said.

Mr. Austria also noted that Metro Manila is one of the densest cities in the world and cannot survive without a good mass transit system.

“We have a lot of developments near train stations, so transit-oriented. This one, [The Crestmont], then there’s Erin Heights, the Infina [Towers]. There are a lot of them. It’s all within 300 meters [train stations],” he said.

The Crestmont condominium is located along Panay Avenue in Quezon City, steps away from the MRT-3 Quezon Avenue Station, and accessible via major road networks like EDSA.

DMCI said the property’s future residents are expected to benefit from ongoing infrastructure projects such as the Metro Manila Subway Project, the MRT Line 7, and the Unified Grand Central Station in North Edsa, Quezon City.

Meanwhile, the Infina Towers along Aurora Boulevard is near the Anonas Station of the upcoming Metro Manila Subway project, indicating the area’s significant investment potential.

He also said that similar to other major cities globally, buying property near a train station, the value increase is “contagious.”

Regarding transit-oriented developments, Mr. Bondoc said transit-oriented retail is now becoming the norm.

“Beyond 2025, we see the development of more masterplanned communities that are developed near public projects such as airports, railways, bus rapid transits, and toll roads,” he said.

The consultancy group sees property firms banking on the capital appreciation potential of their residential projects that will be developed near these “game-changing infrastructure projects.”

Colliers recommends developers align their future residential developments in provinces with upcoming infrastructure such as Cavite, Laguna, Bulacan, Tarlac, Pampanga, Cebu, and Davao, as these public projects have the potential to raise land values and property prices.

“Among the developers likely to benefit from being near public projects are Rockwell Land, Inc., Megaworld Corp., Ayala Land, Inc., Robinsons Land Corp., Sta. Lucia Land, Inc., Vista Land & Lifescapes, Inc., Brittany Corp., Shang Properties, Inc., etc.,” Mr. Bondoc said.

He added that property firms should further ramp up their presence near transportation projects or even build their own TODs to take advantage of the property sector’s growth post-pandemic.

“For both office and residential segments, one thing is certain: developers’ strategies even beyond 2025 are likely to be dictated by the government’s infrastructure push,” Mr. Bondoc said.

He said the firm sees infrastructure projects eventually raising the attractiveness of office spaces and their lease rates.

However, the consultancy company remains cautious about the overall outlook for rental appreciation potential, especially as there are about 2.6 million square meters of available office space across Metro Manila.

Source: Business World

Can the open space be converted into a residential lot?

Can the open space in a subdivision be sold and converted into a residential lot?

Please be informed of Presidential Decree 1216, which defines the term "open space" as an area reserved exclusively for parks, playgrounds, recreational uses, schools, roads, places of worship, hospitals, health centers, barangay centers, and other similar facilities and amenities. Moreover, Section 2 thereof states:

"Section 2. Section 31 of Presidential Decree No. 957 is hereby amended to read as follows:

"Sec. 31. Roads, Alleys, Sidewalks and Open spaces. The owner as developer of a subdivision shall provide adequate roads, alleys and sidewalks. For subdivision projects one (1) hectare or more, the owner or developer shall reserve thirty percent (30%) of the gross area for open space. Such open space shall have the following standards allocated exclusively for parks, playgrounds and recreational use:

"(a) 9% of gross area for high density or social housing (66 to 100 family lot per gross hectare).

"(b) 7% of gross area for medium-density or economic housing (21 to 65 family lot per gross hectare).

"(c) 3.5% of gross area low-density or open market housing (20 family lots and below per gross hectare).

"These areas reserved for parks, playgrounds and recreational use shall be non-alienable public lands, and non-buildable. The plans of the subdivision project shall include tree planting on such parts of the subdivision as may be designated by the Authority.

Upon their completion as certified to by the Authority, the roads, alleys, sidewalks and playgrounds shall be donated by the owner or developer to the city or municipality and it shall be mandatory for the local governments to accept provided, however, that the parks and playgrounds may be donated to the Homeowners Association of the project with the consent of the city or municipality concerned. No portion of the parks and playgrounds donated thereafter shall be converted to any other purpose or purposes."

Under the abovementioned provision of law, the parcel of land in a subdivision designated as an open space must be exclusively used for open space purposes such as parks, playgrounds, recreational uses, schools, roads, places of worship, hospitals, health centers, barangay centers, and other similar facilities and amenities and may not be converted to any other purposes.

In the case of White Plains Association, Inc. v. Legaspi (GR 95522, Feb. 7, 1991), the Supreme Court, through Associate Justice Emilio Gancayco, held:

"Subdivision owners are mandated to set aside such open spaces before their proposed subdivision plans may be approved by the government authorities, and that such open spaces shall be devoted exclusively for the use of the general public and the subdivision owner need not be compensated for the same. A subdivision owner must comply with such requirement before the subdivision plan is approved and the authority to sell is issued."

Hence if a lot is indeed designated as the subdivision's open space, it should be exclusively utilized as such and cannot be sold as a residential lot.

Source: Manila Times