Exploring the Manila Rental Market: Trends, Prices, and Growth Factors in 2023
Date: October 9,2023
Source: DMCI Homes Leasing
The Manila rental market has been through a rollercoaster ride in recent years, with fluctuating demand, changing economic conditions, and the impact of the COVID-19 pandemic. In this blog post, we'll delve into the current state of Manila's rental market, focusing on the latest developments, prices, and the factors driving the growth of condominium rentals in the city.
Steady Demand for House-and-Lot (H&L) and Lot-Only Projects
Colliers, a reputable real estate research firm, has reported steady demand for house-and-lot (H&L) and lot-only projects in key areas outside of Metro Manila. Locations such as Pampanga, Cavite, Laguna, and Batangas have witnessed increased interest from both end-users and developers.
In Pampanga and Bulacan, around 7,200 H&L and lot-only units were sold in 2022, marking a 3 percent increase from the previous year. The Cavite-Laguna-Batangas corridor saw an even more significant rise, with 18,700 units sold by the end of 2022, a 2 percent increase year-on-year. The demand for these projects is partly driven by remittances from Filipinos working abroad.
Horizontal Residential Projects Expanding Outside Metro Manila
Developers are expanding their focus on horizontal residential projects outside Metro Manila. Cebu Landmasters, for instance, plans to launch projects in Southern Luzon, including Naga, Batangas, and Cavite, with potential future expansion in Central Luzon.
Rents and Prices on the Rise
In Q2 2023, Colliers recorded a marginal decline in residential vacancy rates, dropping from 17.4 percent to 17.2 percent. The improvement was observed across all sublocations, including the Bay Area, where vacancy had reached 26 percent in 2021.
The forecast for the end of 2023 suggests a further decline in vacancy rates due to slower condominium completions and increased residential leasing, primarily from returning expatriates. Expats working for business process outsourcing (BPO) companies, shared service centers, multilateral aid agencies, logistics, and manufacturing industries are leading the demand.
This positive trend is reflected in the rental market, with a 1 percent growth in rents recorded in Q2 2023, slightly outpacing the 0.5 percent increase in prices.
Outlook for 2024
Despite the positive outlook for 2023, Colliers anticipates that vacancy rates in the secondary market will likely remain elevated in 2024 due to substantial unit completions. This could put downward pressure on rents, especially in the Bay Area, which is expected to account for 27 percent of completed units by the end of 2024.
Factors Driving the Recovery of Condo Prices in Manila
Several factors contribute to the recovery of condo prices in Manila:
1. Economic Growth: A growing economy leads to increased consumer confidence, higher incomes, and job stability. As people's financial situations improve, they are more inclined to invest in real estate, including condos.
2. Urbanization: Rapid urbanization in the Philippines, driven by better job opportunities and amenities in urban centers, makes condos an attractive housing option.
3. Foreign Investment: A recovering economy attracts foreign investors looking for real estate opportunities, particularly in popular tourist destinations and major business districts.
4. Low Interest Rates: Central banks may keep interest rates low during economic recovery, making it more affordable for individuals to finance condo purchases.
5. Tourism and Hospitality: The recovery of the tourism and hospitality sector can boost condo prices, as condos serve both as residential and vacation properties.
6. Lifestyle Changes: The pandemic prompted lifestyle changes, with more people seeking larger living spaces or condos with innovative designs catering to changing lifestyles.
Key Considerations When Buying or Investing in Condos
If you're considering buying or investing in condos in Manila, here are some factors to keep in mind:
1. Location: Condo prices vary based on location, with major urban centers typically having higher prices due to proximity to job opportunities and schools.
2. Property Type: Condo prices also vary based on property type, such as luxury, mid-range, or affordable housing.
3. Square Footage: Larger condos with more square footage will naturally cost more than smaller units.
4. Amenities and Facilities: Condos with extensive amenities and facilities tend to have higher prices.
5. Developer Reputation: Condos built by reputable developers may come at a premium due to factors like quality and reliability.
6. Market Trends: Property prices can be influenced by market trends, including supply and demand dynamics, interest rates, and government policies related to real estate.
In conclusion, the Manila rental market is showing signs of recovery and growth in 2023, driven by various economic and market factors. As the city continues to evolve, both investors and residents should carefully consider these factors when navigating the condo market.