Philippine regions experience real estate growth

The Philippine real estate sector experiences sustained growth in areas outside Metro Manila, with developers and investors navigating headwinds while capitalizing on inherent strengths.

Despite global economic pressures and domestic challenges like elevated mortgage rates and a glut of unsold units, the Philippines remains a dynamic property market in Southeast Asia. Strong GDP growth, an expanding middle class, and aggressive infrastructure development provide a solid foundation for long-term players. Resilience defines the sector as stakeholders adapt by focusing on regional growth and shifting consumer demands.

Key infrastructure projects are pivotal in reshaping the landscape. The Metro Manila Subway and the North-South Commuter Railway are easing urban congestion and simultaneously creating new development hubs.

The anticipated reduction in travel time between Valenzuela and NAIA, from 90 minutes to 35 via the subway, has already spurred interest in transit-oriented developments. Developers are strategically planning mixed-use projects around these key stations to capitalize on future demand.

"The Philippines remains one of Southeast Asia’s most dynamic property markets," notes Philip Mareschal of JLL Philippines. He acknowledges the oversupply challenges but emphasizes that the underlying fundamentals remain compelling for long-term investors.

This optimism is echoed in the broader economic outlook, positioning the Philippines uniquely within the region. While neighboring countries focus on luxury hospitality, the Philippines is carving a niche by integrating residential innovation with infrastructure-led growth.

Metro Manila, the traditional engine of the property market, faces a significant hurdle. By the third quarter of 2024, unsold condominium units reached 75,300, with Colliers Philippines estimating a 5.8-year absorption period at current rates.

The secondary residential market has also seen a rise in vacancy rates to 17.4%, partly due to the departure of Philippine Offshore Gaming Operators (POGOs), a significant demand driver in the past.

Joey Bondoc of Colliers Philippines said "elevated mortgage rates and the POGO exodus have hit Metro Manila hard."

Bondoc highlighted the success of luxury and transit-linked developments within the capital. Premium properties by developers like Rockwell and Alveo are experiencing strong sales, driven by high-net-worth individuals and expatriates seeking prime urban locations with lifestyle amenities. Alveo Land's record-high gross take-up in Q1 2024 underscores this resilience in the luxury segment.

Beyond Metro Manila, regional markets like Cebu and Iloilo are emerging as growth drivers. Cebu's strategic location, thriving ITBPM sector, and demand for mid-market housing have attracted significant developer interest. Enhanced connectivity through the Mactan-Cebu International Airport and seaports further bolster its appeal to both local and international investors. Bondoc emphasizes Cebu's potential, citing its central position in the Visayas and its robust economy.

Emerging markets such as Iloilo, Palawan and Bohol are also gaining traction, benefiting from improved infrastructure and increased economic activity. In Iloilo, the Jalaur River Multipurpose Project is enhancing water management and creating opportunities for mid-market housing. Palawan's burgeoning eco-tourism sector is driving demand for sustainable, high-end developments, while Bohol's pristine beaches are attracting lifestyle-focused projects. Bondoc advises developers to explore these "thriving property investment sites outside the established prime spots."

Addressing affordability, particularly in Metro Manila where mid-market units constitute a significant portion of unsold inventory, developers are innovating with smaller units, modular construction, and flexible financing options like rent-to-own schemes.

Buyers, especially younger demographics, now prioritize wellness amenities, green spaces and integrated communities. Developers are responding by incorporating smart technologies, rooftop gardens, and co-living spaces into their designs. Sustainability is also becoming a crucial element, with energy-efficient designs and green certifications increasingly standard.

The Philippine residential property market is still expected to experience steady growth, reaching a total value of $5.82 trillion by 2025.

This growth will be fueled by leisure-oriented developments, co-living spaces, and integrated lifestyle communities that cater to the evolving preferences of younger, eco-conscious buyers who prioritize quality of life. The integration of wellness amenities and smart home features in resort-style developments is a key trend.

Bondoc underscored the vital role of infrastructure projects in shaping the market's future. While acknowledging potential challenges such as infrastructure delays and affordability issues, he remains optimistic.

"With strategic investments and innovation, the market is poised to evolve into a more resilient and future-ready landscape," Bondoc said.

The Philippine property market stands at a critical juncture, offering compelling long-term investment opportunities amid accelerating infrastructure development and shifting consumer demands.