Housing supply continues to rise<\/h3>\n

In the second half of 2015, about 5,500 units are projected to be completed in Makati CBD, Fort Bonifacio and Ortigas Center, according to Colliers. These include Park Terraces Tower 2 (Makati CBD), West Tower at One Serendra (Fort Bonifacio), Meranti and Sequoia Towers in Two Serendra (Fort Bonifacio), and One Shangri-la Place North Tower (Ortigas Center).<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n

\n RESIDENTIAL SUPPLY<\/h3>\n<\/td>\n<\/tr>\n
Location<\/b><\/td>\n	Residential Stock<\/b><\/td>\n	Forecast New Supply<\/b><\/td>\n<\/tr>\n
2014<\/b><\/td>\n	2015F<\/b><\/td>\n	2016F<\/b><\/td>\n<\/tr>\n
Makati CBD<\/b><\/td>\n	18,337<\/td>\n	1,768<\/td>\n	4,857<\/td>\n<\/tr>\n
Rockwell<\/b><\/td>\n	\u00a0 4,159<\/td>\n	–<\/td>\n	–<\/td>\n<\/tr>\n
Fort Bonifacio<\/b><\/td>\n	19,427<\/td>\n	3,729<\/td>\n	6,599<\/td>\n<\/tr>\n
Ortigas<\/b><\/td>\n	13,820<\/td>\n	2,756<\/td>\n	1,227<\/td>\n<\/tr>\n
Eastwood<\/b><\/td>\n	\u00a0 7,548<\/td>\n	–<\/td>\n	\u00a0\u00a0 988<\/td>\n<\/tr>\n
Total<\/b><\/td>\n	63,291<\/b><\/td>\n	8,253<\/b><\/td>\n	13,671<\/b><\/td>\n<\/tr>\n
Source: Colliers International<\/b><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n  <\/p>\n In Q2 2015, three upscale residential condominium buildings entered the market in Metro Manila, totalling 1057 units:<\/p>\n \n Avida Towers BGC 9th Avenue Tower 2 in Fort Bonifacio\u2013 256 units<\/li>\n Robinsons Land Trion Towers 2 in Fort Bonifacio \u2013 711 units<\/li>\n Discovery Primea in Makati CBD \u2013 90 units<\/li>\n<\/ul>\n Low interest rates<\/h3>\n <\/p>\n The BSP kept its policy rate at 4% for the overnight borrowing or reverse repurchase (RRP) facility in September 24, 2015, and 6% for the overnight lending and repurchase facility (RF). The reserve requirement ratios were also left unchanged.<\/p>\n Most borrowing is short-term. Housing loan rates charged by major commercial banks range from 5.3% to 7.8% for one-year fixed loans, and from 7% to 10% for mortgages with fixed rates for five years.<\/p>\n Real problems impede the growth of the mortgage market. Few major banks offer housing loans, although loan-to-value ratios of 90% are now being offered, and loan tenors can be as long as 30 years. Different banks\u2019 loans have strangely similar terms and conditions, and approval of loan applications takes a long time. Land titling and registration problems are prevalent, as are delays in the foreclosure process.<\/p>\n <\/p>\n Property buyers also face high transaction costs, corruption and red tape, fake land titles and substandard building practices. Plus, the large informal housing sector and their incentives, make it less attractive for low to middle income families to buy or rent properties.<\/p>\n Because of these factors, the ratio of residential mortgage loans to GDP remains small, at around 3.1% of GDP in 2014. Most houses in the Philippines are sold for cash or pre-sold, with the developers offering financing.<\/p>\n Residential rents up, vacancy rates down<\/h3>\n Residential rents continue to increase in the major CBDs, mainly due to strong demand and lack of new completions.<\/p>\n In the second quarter of 2015:<\/p>\n \n In Makati CBD, monthly residential rents rose by 1.6% q-o-q to PHP590-1,135 (US$13-24) per sq. m.<\/li>\n In Fort Bonifacio, monthly residential rents rose by 1.9% q-o-q to PHP770-1,100 (US$16-23) per sq. m.<\/li>\n In Rockwell, monthly residential rents rose by 1.8% q-o-q to PHP670-1,070 (US$14-23) per sq. m.<\/li>\n<\/ul>\n  <\/p>\n Rents in these locations are projected to increase further by 4.7% to 5.1% in the next 12 months, according to Colliers.<\/p>\n In Makati CBD, residential vacancy rates across all grades fell to 7.64% in Q2 2015 from 7.96% in the previous quarter, based on figures from Colliers.<\/p>\n \n For the luxury segment, the vacancy rate dropped to 3.85% in Q2 2015, from 4.3% in Q1 2015<\/li>\n For the other segments, the vacancy rate dropped to 8.21% in Q2 2015, from 8.66% in Q1 2015<\/li>\n<\/ul>\n  <\/p>\n The residential condo rental market remained tight in the rest of the country\u2019s major CBDs.<\/p>\n \n In the Rockwell Center, the vacancy rate fell to 4.35% in Q2 2015<\/li>\n In Fort Bonifacio, the vacancy rate stood at around 7% in Q2 2015<\/li>\n In Ortigas Center, the vacancy rate stood at about 9.5% over the same period<\/li>\n<\/ul>\n  <\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n \n RESIDENTIAL LEASE RATES, Q2 2015<\/h3>\n<\/td>\n<\/tr>\n Location<\/b><\/td>\n Type<\/b><\/td>\n Minimum monthly rent<\/b><\/td>\n Maximum monthly rent<\/b><\/td>\n<\/tr>\n PHP<\/b><\/td>\n USD<\/b><\/td>\n PHP<\/b><\/td>\n USD<\/b><\/td>\n<\/tr>\n Forbes Park<\/b><\/td>\n Exclusive Village<\/td>\n 250,000<\/td>\n 5,323<\/td>\n 600,000<\/td>\n 12,776<\/td>\n<\/tr>\n Dasmarinas Village<\/b><\/td>\n Exclusive Village<\/td>\n 200,000<\/td>\n 4,259<\/td>\n 500,000<\/td>\n 10,647<\/td>\n<\/tr>\n Urdaneta Village<\/b><\/td>\n Exclusive Village<\/td>\n 200,000<\/td>\n 4,259<\/td>\n 500,000<\/td>\n 10,647<\/td>\n<\/tr>\n Bel-air Village<\/b><\/td>\n Exclusive Village<\/td>\n 130,000<\/td>\n 2,768<\/td>\n 300,000<\/td>\n 6,388<\/td>\n<\/tr>\n San Lorenzo Village<\/b><\/td>\n Exclusive Village<\/td>\n 120,000<\/td>\n 2,555<\/td>\n 280,000<\/td>\n 5,962<\/td>\n<\/tr>\n Magallanes Village<\/b><\/td>\n Exclusive Village<\/td>\n 90,000<\/td>\n 1,916<\/td>\n 200,000<\/td>\n 4,259<\/td>\n<\/tr>\n Ayala Alabang Village<\/b><\/td>\n High-rise Condo<\/td>\n 75,000<\/td>\n 1,597<\/td>\n 250,000<\/td>\n 5,323<\/td>\n<\/tr>\n Apartment Ridge\/Roxas Triangle<\/b><\/td>\n High-rise Condo<\/td>\n 120,000<\/td>\n 2,555<\/td>\n 285,000<\/td>\n 6,069<\/td>\n<\/tr>\n Salcedo Village<\/b><\/td>\n High-rise Condo<\/td>\n 140,000<\/td>\n 2,981<\/td>\n 280,000<\/td>\n 5,962<\/td>\n<\/tr>\n Legaspi Village<\/b><\/td>\n High-rise Condo<\/td>\n 120,000<\/td>\n 2,555<\/td>\n 250,000<\/td>\n 5,323<\/td>\n<\/tr>\n Rockwell<\/b><\/td>\n High-rise Condo<\/td>\n 140,000<\/td>\n 2,981<\/td>\n 220,000<\/td>\n 4,685<\/td>\n<\/tr>\n Fort Bonifacio<\/b><\/td>\n High-rise Condo<\/td>\n 115,000<\/td>\n 2,449<\/td>\n 285,000<\/td>\n 6,069<\/td>\n<\/tr>\n Source: Colliers International<\/b><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Gross rental yields remain high, but beware of taxes<\/h3>\n <\/p>\n According to research by the Global Property Guide<\/a>, gross rental yields in Metro Manila remain good, ranging from 7.04% on the very smallest condominium units of 30 sq. m.\u00a0\u00a0to 7.7% on 80 sq. m. condominiums.<\/p>\n These yields are before taxes and other expenses.\u00a0 They are for the high-end areas:\u00a0 Makati CBD, Ortigas CBD, Rockwell, The Fort, and Eastwood City.<\/p>\n This does not mean that foreign investors should necessarily rush to invest in Manila, because transaction taxes (known as \u2018capital gains taxes\u00b4, but not actually such), and (if observed) official income tax rates applicable to non-resident investors, are high.<\/p>\n Manila\u2019s segmented market<\/h3>\n Lower down the income scale there is cause to worry.<\/p>\n There are three identifiable segments in Manila\u2019s housing market:<\/p>\n \n The high end.<\/b>\u00a0Local high-earners and expatriates occupy this segment.<\/li>\n The middle tier.<\/b>\u00a0The mid-end condominium sector, with monthly amortization of around PHP 10,500 (US$ 235), presently requiring a dispensable income greater than PHP 34,962 (US$ 783), to obtain a housing loan of PHP 2 million (US$ 44,801).\u00a0 This segment has been targeted by many developers, and is attractive to overseas foreign workers (OFWs).<\/li>\n The low end.<\/b>\u00a0 This is where the mass of the population live.<\/li>\n<\/ul>\n We believe that the middle tier is over-supplied.\u00a0 Many of these lower middle-class condominium developments are ghost cities.<\/p>\n Manila\u2019s ghost cities<\/h3>\n <\/p>\n A visit to any \u2018Barrio Fiesta\u2019 in any city where Philippine OFWs work abroad is dominated by condominium offerings from developers like Megaworld, DMCI, Ayala Land, etc..\u00a0 The Philippines is one of the world\u2019s largest remittance recipients, with 10.5 million Philippine Overseas Foreign Workers (OFWs) living and working in 210 countries and territories worldwide, 47% of them permanent migrants, 40% temporary, and the rest “irregular migrants”. Among the permanent overseas Filipinos, 65.2% live in the US, followed by Canada (13.1%), Europe (7.1%), Australia (6.8%), and Japan (3.4%), according to the Commission on Filipinos Overseas<\/a>\u00a0(CFO).\u00a0 In 2014, total remittances reached a record high of US$24.3 billion (or about 10% of GDP), up by 5.9% from a year earlier. In June 2015, remittances rose by 6.1% y-o-y to US$12.18 billion, the highest level since December 2014.<\/p>\n It is estimated that 60% of these remittances go directly or indirectly to the real estate sector, according to the World Bank. These OFW remittances power the low-end to mid-range residential property market, housing projects and mid-scale subdivisions in regions near Metro Manila, such as Cavite, Batangas, and Laguna Provinces.<\/p>\n According to the Philippine Housing and Land Use Regulatory Board, 452,198 condominium units were built in Metro Manila from January 2001 to March 2014. There are around 807,496 families or 27.5% of the NCR population who have a dispensable income greater than PHP 34,962 (US$ 783), which is the required monthly income to be able to afford the monthly amortization of PHP 10,500 (US$ 235). PHP 10,500 (US$ 235) is the minimum monthly amortization for a housing loan of PHP 2 million (US$ 44,801), with accommodating loan rates of 90% LTV, with an annual interest rate of 5.7%, and a loan tenor of 30 years.<\/p>\n So for all these newly-built condominiums to be occupied by those who could afford to rent or buy (we calculate for the buying case, but given current interest rates it may be more expensive to rent), 56% of locals who have the financial capacity to occupy them would need to do so, i.e., 56% of the 807,496 families with the financial capacity to do so, should purchase or rent a unit, for the available supply of condominium units to be taken up.<\/p>\n These are problematic numbers given that many of these families already have houses in the first place.\u00a0 The World Bank assumes only 10% of these capable end-users as prospective end-users, indicating a gross oversupply.<\/p>\n In terms of affordability, property developers are building more mid-end condominium units than locally-based Filipinos can afford to occupy.\u00a0 Many of the buyers are OFWs, causing a mismatch between demand and supply.<\/p>\n Average annual growth of remittances was only 6.7% from 2009 to 2014, compared to 16.8% annually from 2004 to 2009. The World Bank believes the slowdown in remittances is due to:<\/p>\n \n Stricter Implementation of the migrant workers\u2019 bill of rights;<\/li>\n Political uncertainties in host countries; and<\/li>\n The slowdown in the advanced economies.<\/li>\n<\/ul>\n A puzzle \u2013 why are call-centre workers under-housed<\/h3>\n The Philippines has a thriving business process outsourcing (BPO) sector. The BPO industry is now one of the country\u2019s biggest sources of revenues, providing employment to a large number of workers.<\/p>\n The country\u2019s revenues from the BPO industry is expected to reach US$25.5 billion in 2016, according to FT Confidential Research. By that year, it is estimated that as many as 1.3 million people will be employed in the BPO sector.<\/p>\n BPO agents are likely to wish to rent residential spaces near their workplaces due to their night shift schedules.\u00a0 Since BPO agents have foreign countries as their clientele, their work hours follow suit. This means that most BPO employees work at the night time where commuting is risky while taxi cab fares are expensive.<\/p>\n There is a puzzle here.\u00a0 The income of this rising demographic overlaps with the investments made by the OFWs.\u00a0 Many call-centre agents are in the targeted income-bracket.\u00a0 But anecdotal evidence suggests that many of condominiums bought by OFWs are in the wrong place for call-centre agents.<\/p>\n In any case, the bottom line is that their spending-power is not yet strong enough to absorb supply.\u00a0 Many have family obligations and prefer to live at home or with relatives.<\/p>\n Maybe this will change.\u00a0 The Philippines will also soon experience a demographic \u2018sweet spot\u2019.\u00a0 The country has the third youngest population in the ASEAN region, next only to Lao PDR (median age of 21 years) and Cambodia (median age of 22 years).\u00a0 Based on its demographic profile, we can expect a strong demand for starter homes.<\/p>\n \u201cAffordable\u201d housing<\/h3>\n The Philippines has a huge housing need at the low end. There are as much as 300,000 households in Metro Manila residing in informal and uninhabitable housing units which composes 8.7% of the total Metro Manila population.<\/p>\n These people live in appalling conditions. Many others live in very poor conditions.<\/p>\n To meet the needs of these families, the government embarked on the National Shelter Program to provide housing for informal settlers and other families who do not have enough income to rent nor buy houses in the prevailing markets rates.<\/p>\n Socialized housing units, or those which cost less than PHP 450,000 (US$ 10,800) can be purchased with a monthly amortization of PHP 2,302 (US$ 56). The Pag-Ibig Fund, (which is the Filipino word for love), the country\u2019s state-owned and subsidized housing loan provider, provides a fixed rate of 4.5% for 30 years for socialized housing units.<\/p>\n The problem is that these low-end housing units are usually far from work.<\/p>\n Robust economic growth<\/h3>\n <\/p>\n In the second quarter of 2015, the Philippine economy grew by 5.6%, up from the growth of 5% in the previous quarter, but down from last year\u2019s 6.7% growth, amidst regional slowdown, based on figures from theNational Economic and Development Authority<\/a> (NEDA). This can be attributed to the strong performance of industry and services sectors, and robust government spending.<\/p>\n The robust economic growth in Q2 2015 reflects the country\u2019s “resiliency from the prevailing weaknesses of the global economy,” said NEDA chief Arsenio Balisacan.<\/p>\n Economic growth is expected between 6% and 6.5% this year, after real GDP growth rates of 6.1% in 2014, 7.2% in 2013 and 6.8% in 2012, according to government estimates. The Philippine economy is boosted by consumer spending, private investments and a recovery of government expenditures, according to theAsian Development Bank<\/a> (ADB). In addition, election-related spending is also expected to buoy domestic demand through May 2016, when the national and subnational elections are held.<\/p>\n In July 2015, the nationwide unemployment rate fell to 6.5% from 6.7% in the same period last year, according to the Philippine Statistics Authority<\/a> (PSA). The country expects unemployment to fall between its target range of 6.6% to 6.8% this year, buoyed by strong job generation in manufacturing and tourism sectors.<\/p>\n In June 2015, the country\u2019s inflation rate slowed to 1.2%, down from 1.6% in the previous month and the lowest level in about two decades, according to NEDA. The tamed inflation was mainly due to the steady and sufficient supply of food and reduced electricity prices due to lower fuel costs. The government\u2019s inflation target for this year range from 2% to 4%.<\/p>\n The country\u2019s inflation is projected at 2.8% this year and 3.3% in 2016, from 4.4% in 2014, according to the ADB. “There are risks to this forecast from El Ni\u00f1o weather conditions that are expected to last through the first half, as well as from possible power shortages and pending petitions for higher electricity tariffs,” the ADB said.<\/p>\n","protected":false},"excerpt":{"rendered":" The Philippine residential property market continued to perform spectacularly, amidst robust economic growth. During the year to Q2 2015, the average price of a luxury 3-bedroom condominium unit in Makati central business district (CBD) surged 7.91% (6.61% inflation-adjusted) to PHP149,300 (US$3,179) per square metre (sq. m.), according to Colliers International. During the latest quarter, condominium […]<\/p>\n","protected":false},"author":199,"featured_media":1671,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[9,11,12,13,71,45,18,34],"tags":[72],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/researchpropertygroup.com\/wp-content\/uploads\/2016\/07\/research-property-group-crowdfunding-philippines.jpg?fit=640%2C428&ssl=1","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p74xid-qW","jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/researchpropertygroup.com\/wp-json\/wp\/v2\/posts\/1670"}],"collection":[{"href":"https:\/\/researchpropertygroup.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/researchpropertygroup.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/researchpropertygroup.com\/wp-json\/wp\/v2\/users\/199"}],"replies":[{"embeddable":true,"href":"https:\/\/researchpropertygroup.com\/wp-json\/wp\/v2\/comments?post=1670"}],"version-history":[{"count":1,"href":"https:\/\/researchpropertygroup.com\/wp-json\/wp\/v2\/posts\/1670\/revisions"}],"predecessor-version":[{"id":1672,"href":"https:\/\/researchpropertygroup.com\/wp-json\/wp\/v2\/posts\/1670\/revisions\/1672"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/researchpropertygroup.com\/wp-json\/wp\/v2\/media\/1671"}],"wp:attachment":[{"href":"https:\/\/researchpropertygroup.com\/wp-json\/wp\/v2\/media?parent=1670"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/researchpropertygroup.com\/wp-json\/wp\/v2\/categories?post=1670"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/researchpropertygroup.com\/wp-json\/wp\/v2\/tags?post=1670"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}