APPD Market Report Article

Manila

May 26, 2024

Janlo Delosreyes, Head of Research, Philippines

0.8%

PHP 832

Decline
Slowing

Residential lease demand maintains its momentum

  • Leasing demand continued to rise in 1Q24, with 798 units of net absorption. Demand coming from executives and foreign expatriates continued to increase as return-to-office (RTO) rates slowly recovered.
  • Sales demand in the residential segment started to decline, with more returned inventory than sold units. Investors remained cautious in their spending habits as economic headwinds persisted at the start of 2024.

Supply grows further and is expected to expand more by year-end

  • The supply pool has increased by an estimate of 818 units in 1Q24. Newly turned-over units came from Taguig City, namely Park McKinley West and The Seasons Residences. New developments in Taguig City and Makati City are expected to turn over in the coming quarters.
  • The vacancy rate continued to move sideways, recording a slight improvement and settling at 7.2%, a 1.92 bps decrease q-o-q. This is expected to continue in the near term, given the slow improvement of the RTO rate.

Rents contract while capital values grow slowly

  • Low-performing units pulled rents downward to PHP 831.8, a 0.3% decrease q-o-q, in a bid to improve demand amid the economic headwinds.
  • Capital values continued to expand, but at a slower pace, reaching PHP 294,995 per sqm, a 0.8% q-o-q increase. The decline in sales demand, coupled with the high interest rates, slowed the growth of prices.

Outlook: Rents and capital values to maintain slow recovery

  • Leasing demand is likely to remain stable as RTO rates slowly improve in the coming quarters. On the other hand, sales demand should improve as interest rates are expected to go down towards year-end.
  • Rents may gradually increase as owners adjust prices due to the slow but improving leasing demand. New stock is expected to pull the average rate upward. On the other hand, capital values should continue to rise amid headwinds, but at a slower pace, backed by the improving economic landscape.

Note: Manila Residential refers to the Makati City and Taguig City mid-high and luxury residential market.

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