KMC Savills, the country’s leading real estate brokerage and consultancy firm, held its first market briefing to present the latest data and outlook on the Philippines’ property market.
The presentation was led by KMC Savills’ Research and Consultancy and Information and Data Management Group together with KMC Savills Executives Managing Director Michael McCullough and Chief Operating Officer Cha Carbonell.
Starting the event, KMC Savills Senior Research Manager, Fredrick Rara discussed the current situation of the Metro Manila Office market sector. The Metro Manila office market rebounded in 2022 with a net absorption of around 270,900 sq m and a reversal from the negative take-up a year prior. KMC Savills forecasts net absorption to slightly increase in 2023 but may be isolated in the top submarkets.
In the Industrial and Logistics sector, KMC Savills Research and Consultancy Manager Randolf Ilawan shared that a “supply shortage of high-quality facilities is seen, assuming no additional completions will take place.” A positive outlook can be seen for the country’s industrial market. KMC Savills research data shows that the vacancy rate for 2023 is forecasted to decrease from 7.8% in 2022 to 6.9%.
In the Residential market sector, KMC Savills Senior Research Manager Joshua De Las Alas shared that property developers that has the financial capacity should explore the opportunity in the high-end to luxury markets as demand is seen to be resilient to market uncertainties. At the same time, KMC Savills sees opportunities for middle market developers in CBD fringes and areas near universities given the return of workforce and students on-site.
Philippine GDP continued to recover after growing 7.6% in 2022, but growth was observed to slow down in the last quarter as inflation eats into consumption budgets. OFW remittances continued to support growth, but the stellar performance by the BPO sectors is expected to exceed remittance contribution in the near future. However, in the short term, we expect interest rate hikes by the BSP to weigh heavily on households on top of inflation.
As the BSP forecasts inflation to normalize at the tail end of 2024, we believe the high-interest rate regime will last until 2025 barring any improvements in global geopolitical conditions. As such, we expect the market to prioritize liquidity this year and focus on unlocking the value of its portfolio.
Overall, we still see positive gains in Philippine real estate. However, we highlight the risks of facing higher interest rates after a decade of loose monetary policy
