Oversupply forecast to depress Manila condo market further

PUBLISHED : Wednesday, 15 December, 1999, 12:00am
UPDATED : Wednesday, 15 December, 1999, 12:00am

Rents and prices in the Manila condominium market are forecast to decline a further 10 to 15 per cent due to excess supply, according to FPDSavills.

The property consultant said residential condominium developments would continue to perform weakly and drag on earnings growth of owners and developers.

Forecast take-up of condominiums in the Makati and Ortigas business districts would fall this year and vacancies could reach about 34 per cent, it said.

Vacancy rate was expected to rise to about 41 per cent in the two districts next year but might improve to 32 per cent by 2001 as the effects of the supply surge moderated.

Condominium developments were considered a niche market in Manila and served only a very small percentage of the country's population particularly in central Manila, FPDSavills said.

This market would continue to grow for both end-users and investors as the business climate improved in the medium term.

According to the consultant, new supply of condominiums in Makati and Ortigas districts will total 5,998 units, representing 1.1 million square metres in gross floor area, from this year to 2001.

Demand will remain weak, creating further downward pressure on rents and capital values and resulting in delays in the completion of certain projects.

Investors were waiting for prices to fall further while buyers were still reluctant to purchase at current prices in light of the recent high interest-rate environment and economic uncertainty, it said.

FPDSavills expected overall rents to fall by about 15 per cent as landlords softened their stance in view of the supply situation and increased competition.

It estimated that rental levels in Makati, which continued to enjoy a premium to overall market, would average 470 pesos (about HK$89.44) per square metre this year.

The rates were expected to decline to 464 pesos next year but move upwards to 477 pesos by 2001 in anticipation of an improved economic environment.

Rents in Ortigas would average 275 pesos per sq metre this year, dip to 256 pesos next year and 255 pesos in 2001, the consultant said.

On the sales market, potential purchasers had expressed a desire to remain liquid and had delayed major capital acquisitions during the current downturn.

Condominium prices in Makati were still expected to command a premium over those in the Ortigas district and should average 77,000 pesos per sq metre this year and would decline to 73,000 pesos per sq metre in the next two years.