Philippine property market expected to rebound in 2021
Despite the pandemic, projects in the mid-income through luxury segments (PHP3.2 million or USD66,700 and above) showed resilience in the first 9 months of 2020. The segments accounted for 89% of total launches during the period. Mid-income to luxury projects also covered 85% of total sales in the pre-selling market, up from 72% vs. the first 9 months of 2019.
Over the past two years, mid-income segments accounted for 68% of the total pre-selling take up in Metro Manila. Demand in the residential sector in 2021 will likely be driven by mid-income to luxury projects. As of Q3 2020, Colliers Philippines data showed that projects in these segments due to be completed from 2021 to 2022 have sold an estimated 86% of their inventory. To tap pent up demand, developers should continue to offer flexible payment terms and adopt property technology (proptech) platforms. These include virtual reality (VR) tours and automated communication platforms for tenants and property management providers.
As an increase in demand is expected, prices and rents are expected to recover starting H2 2021 on the back of improved office space absorption. By the end of 2021, prices and rents are projected to grow by 1.7% and 2.1%, respectively, a reversal from -13% and -7.7% in 2020.
Condominium developers planning to tap the pent-up demand in 2021 should consider attractive price segments and locations for pre-selling developments. In the first 9 months of 2020, around 48% of mid-income projects that were sold during the period were located in Parañaque, Pasig, and the Alabang-Las Piñas area. During the same period, the bulk of upscale to luxury projects that were sold were in Parañaque, Bay Area, Ortigas Center and fringe, and the C-5 Pasig corridor.
Office landlords, condominium developers, and mall operators should be mindful of the government-projected recovery in 2021. Developers should be more strategic with their land banking and development strategies so they can capture demand once the economy rebounds in 2021. This pace of recovery should have a positive impact on Philippine property.
In the first half of 2020, hotel occupancy in Metro Manila dropped to 25% from 71% in the second half 2019, due to the global travel restrictions. Most of the hotel guests during the lockdown were returning overseas Filipino workers (OFWs), health workers and professionals whose daily commute was limited by the suspension of mass transportation in the capital region.
Hotel operators should be more agile, consider other leasing models and repurpose spaces into co-living facilities and flexible workspaces. The pandemic also highlighted the need for hotel operators to roll out innovative services that could enhance customer experience using modern technology, such as keyless check-ins, smart room controls and 24/7 mobile connectivity.