Philippine residential prices to inch up 1.5% in 2022
The pace of growth will likely hinge on a rebound in office leasing.
The Philippine economy contracted 9.5% in 2020, the worst performance since World War II and the first annual decline since 1998, according to Colliers. Despite this, projections are for a rebound of 5.9% to 9.6% in 2021, supported by the easing of quarantine restrictions and the deployment of vaccines. This recovery should have a positive impact on the property market.
Office space absorption has continued to slide, with a net takeup of −183,100 sq metres (−1.9 million sq feet) in 2020, down 120% from 2019 – the first ever negative take-up recorded on an annual basis. New supply only reached 425,500 sq metres (4.6 million sq feet) in 2020, down 60% from our initial estimate, as COVID-19 hampered the completion of new buildings. Office rents on average dropped by 17% in 2020.
Here’s more from Colliers:
Residential prices and rents dropped by 13.2% and 7.8%, respectively, in 2020. 3,370 condominium units were completed in 2020, down 70% from 2019. Given the effect of COVID-19 on residential demand and subdued office leasing, vacancy for 2020 set a record high of 15.6%
In the office sector, we have observed landlords becoming more flexible in accommodating tenants’ requests for lower lease rates and other concessions. These may come in the form of longer rent-free periods, fit-out allowances and other customised incentives to secure occupancy despite the delivery of substantial new supply in 2021. The pace of recovery in office leasing will likely hinge on the progress of vaccine rollouts.
Turning to residential, we expect a rebound in condominium completions in 2021 with the delivery of 10,600 units, which is expected to push vacancy rates up further. In 2022, we expect prices and rents to gradually increase by 1.5% and 1.7%. The pace of growth will likely hinge on a rebound in office leasing and improved investor sentiment. This should be supported by low interest rates and competitive mortgage rates.