If you are thinking about Philippine condo investment in 2021, there are a few things you are going to want to know. To start with, it is a bit of a disjointed time for the condo market. After years of steady growth, prices fell drastically in the third quarter of 2020 and haven’t really recovered yet.
However, not all segments and locations have been impacted. Many experts remain optimistic about the overall state of the market. So, while Philippine condo investment in 2021 can still be a smart play, it’s important to understand the current situation which is very different from prior years.
4 things to know about Philippine condo investment in 2021
Luxury dominates Metro Manila
The Bangko Sentral ng Pilipinas (BSP) Residential Real Estate Price Index found that condo prices in Metro Manila declined in both the third and fourth quarter of 2020. Despite this, JLL found the luxury condominium market to be resilient last year with pre-selling projects in high demand.
“Luxury projects are doing relatively well while some declines of existing projects are offset by the resiliency of upcoming projects in Taguig and Makati, but the mid-level has been affected by price decline given the weakened overall demand,” Janlo Delos Reyes, Head of Research and Consultancy at JLL Philippines, was quoted as saying by the Manila Bulletin.
This was corroborated by research from Colliers International that found 86 percent of luxury and mid-market property developments set to be completed between now and 2022 had already been sold. According to the consultancy, a limited supply of luxury condominium units in Metro Manila means both prices and rents should continue to increase.
On the other end of the spectrum, prices and rents for low- and mid-end condominium units in Metro Manila are falling. Several developers noted a change in consumer preferences as it relates to housing. The “New Normal” and work from home measures now being adopted in the Philippines means living in the city is no longer a requirement for most people.
With that being the case, more home seekers are currently looking at house and lots in provincial areas adjacent to the National Capital Region. These are similarly priced to mid-range condominiums in Metro Manila and usually provide more space and wellbeing benefits.
This trend isn’t simply impacting the residential sector. Many Philippine businesses are moving to suburban townships which may accelerate demand for housing outside the NCR.
Cebu prospects remain bright
The best place for Philippine condo investment in 2021 is most likely Cebu. Two key factors have been responsible for driving residential demand in Cebu over the past ten years. Firstly, home prices are significantly less than those in Metro Manila which is appealing to buyers. Secondly, a number of infrastructure projects will improve the region’s connectivity and boost property prices in the future.
“Colliers projects a potential rebound in residential demand in 2021 (in Cebu) and thus sees a faster pace of price increase from 2021 to 2022 to reflect a stronger residential market,” Joey Bondoc, Colliers Philippines Senior Research Manager explained to the Philippine News Agency. “The residential sector of the area is at a discount as compared to projects located within the country’s capital. The proliferation of both local and national developers in Cebu has raised land and property values.”
Think long term
Those considering Philippine condo investment in 2021 need to look at the bigger picture. Prior to 2020, home prices across the board had increased for five consecutive years. Obviously, COVID-19 has impacted the property market, but things should recover quickly once the situation returns to normal.
First Metro Investment Corporation, the investment banking arm of the Metrobank Group, believes the Philippines will record 6- to 7-percent GDP growth and attain USD4,000 per capita by 2023. Meanwhile, BSP has envisioned a scenario where GDP growth could reach as high as 10 percent in 2022.
What’s more, there remains real demand for all types of housing in the Philippines. The climate here is much better than Thailand and Malaysia where oversupply is currently prevalent when it comes to condominiums. Undoubtably challenges remain but investing int the Philippine condo market is still worth considering this year.