If you’re in Metro Manila, you would have to be blind not to see the numerous high-rise residential condominiums being constructed. From a little more than 7,000 condominium units completed at the beginning of the millennium, the number of condominium units in Metro Manila jumped to roughly 90,000 by end-2011. The annual new supply of condominium units started growing sharply around 2005. From then until 2011, supply growth has averaged more than 30% annually.
However, we don’t think that the current growth spurt is over yet. From 2012 to 2016, more than 200 residential condominium projects are expected to be constructed, which will produce approximately 120,000 housing units. This means that an average of 24,000 units is scheduled for completion each year for the next five years. Despite this massive volume of incoming residential supply in Metro Manila, developers have remained optimistic and some have plans to launch even more residential projects. Thus, the forecast supply of 120,000 residential units may go even higher in the coming months.
Figure 1. Cumulative Supply of Mid- to High-End Condominiums in Metro Manila
Note: Mid-end condominium units generally have selling prices ranging from PHP 1.5 million to PHP 10 million, while high-end condominiums typically have prices above PHP 10 million.
Source: Jones Lang LaSalle Leechiu Research & Consulting
With the large number of condominium developments in Metro Manila, competition among developers, as a result, has become more intense. In order to attract buyers, developers have employed several measures including adding unique features or using international brands in the projects. Unique features may include incorporating “green” technology into the development. Meanwhile, international branding of residential projects has somewhat become a trend in recent years. For one, the Shangri-La Hotels brand entered the residential condominium scene with its first development, Shang Grand Tower, in Makati CBD back in 2006. Now, there are two existing Shangri-La branded condominiums, with three more on the way. Other upcoming international branded condominiums include the Raffles Residences, the Trump Tower Manila, and the planned Grand Hyatt residential tower.
Other measures used by residential developers to secure buyers include offering discounts and more flexible payment schemes. Currently, discounts usually range from around 2% to 10% depending on the buyer’s payment scheme, but can go as high as 20%. Some developers even offer discounts of up to 40% of the total selling price. As well as discounts, payment schemes can be a major deciding factor for buyers. Previously, downpayments on condominium purchases ranged from 20%-30%, however, now downpayments range from 10%-20%, with some developers offering no downpayment schemes. These are just a few of the new trends spreading through the market right now.
The residential condominium landscape in Metro Manila has changed significantly in the last ten years. The residential condominium supply has grown tremendously in the past decade and is expected to more than double in the next five years. Condominiums have become more affordable to the middle-income market and competition among developers has increased. But the change in the landscape is not over yet, as the residential condominium market in Metro Manila continues to evolve further.
About the author
Jessica Mae Go is a Senior Research Analyst for Jones Lang LaSalle in Philippines, based in Manila.
You have described the supply side of the luxury condo market. What about the demand side? Is a glut in the forecast? How soon, if it should happen?
Thank you for your comment and questions. With the massive supply coming in the market in the next few years, there have been concerns that a supply glut will likely occur in the residential condominium market in Metro Manila. For now, I don’t think a glut is likely to occur in the next couple of years considering many of the units to be completed by then have already been sold. Moreover, while vacancy rates in condominiums have been observed to be slowly rising, they are expected to remain in manageable levels in the short- to medium-term. A potential glut in the market, specifically the mid-end market, may be a possible event in four to five years time if the growth rate of new supply in the coming years continues to rise further, and if the country’s economic growth can not be able to support a robust growth in the property sector. Conditions in the market, however, may change and the potential supply glut may be further down the road or may hit earlier than expected. Nevertheless, developers and investors are advised to always exercise caution and careful planning.