An optimistic outlook is forecasted for the Philippine real estate market in 2024, according to a report by KMC Savills, the country's leading real estate brokerage and consultancy firm.
Supported by the Bangko Sentral ng Pilipinas (BSP) report indicating a projected decrease in inflation to two to four percent and a five percent decline in interest rates, the year is expected to be favorable for real estate.
KMC Savills projects positive growth in real estate, with a continued increase in office space take-up for the second consecutive year. The retail sector also shows promising signs, with occupancy rates and foot traffic gradually returning to pre-pandemic levels as businesses resume operations across the country. Additionally, the progress in tourism and hospitality, marked by a 105 percent increase in international tourist arrivals in 2023, contributes to the overall advancement of the real estate sector.
However, uncertainties loom over the industrial and logistics sectors due to supply and demand mismatches. The residential market also faces uncertainties in 2024, primarily attributed to saturation in the middle-market segment.
According to KMC Savills CEO Joe Curran, "upcoming office completions are set to invigorate leasing activities" with demand anticipated to remain robust throughout 2024. Notably, prime locations such as Bonifacio Global City continue to lead in office stock and supply.
Despite a competitive office market, Makati's new skyscrapers maintain high occupancy rates, with significant transactions completed in the final quarter of 2023. Office leasing prices in Metro Manila have stabilized post-pandemic, albeit at a 6.7 percent reduction from pre-pandemic rates. Interestingly, Iloilo experienced a rise in rental rates during the pandemic, driven by ongoing demand from the BPO industry.
For the industrial sector, Cha Carbonell, COO of KMC Savills, said "manufacturing and logistics are paving the way for industrial hubs.”
More than half of the warehouse goods is reportedly mostly located in Laguna. On the other hand, high vacancies could put pressure on warehouse rates. The huge declines in Pampanga's rental prices of 21 percent and Bulacan's rental rates of 42 percent are especially remarkable.
Joshua De Las Alas, associate director of KMC Savills Research and Consultancy, discussed the shift in market dynamics within the residential sector. He highlighted the trend of middle-class buyers increasingly turning to Pag-IBIG for financing, particularly outside Metro Manila.
The demand for residences close to workplaces has decreased, leading to a slowdown in mid-market condominium sales alongside rising interest rates. However, developers are focusing more on high-end and luxury projects, with approximately 65 percent of new launches in the last two years falling into this category. Notably, around half of the 40,000 unsold units originate from mid-market developers, highlighting market challenges in this segment.