CEBU CITY – The major infrastructure projects shaping up in Metro Cebu are expected to drive the demand for residential condominiums moving forward, as the real estate industry here looks forward to gradual recovery from the coronavirus disease 2019 (Covid-19) pandemic.
Joey Bondoc, associate director for research at Colliers International Philippines, said they see the pivotal infrastructure projects such as the Cebu Cordova Expressway, the third bridge linking the mainland and Mactan Island, and the Metro Cebu Expressway boosting residential condominium demand in Cebu.
“These public infrastructure projects should help attract more developers and investors in acquiring parcels of land around these major projects,” Bondoc told the Philippine News Agency on Tuesday.
Colliers believes that completion of residential units is likely to pick up this year.
In the pre-selling market, the property consultancy firm projects a slight recovery as developers prepare for pent-up demand beyond 2021.
“We believe that demand for residential units in integrated communities is likely to continue despite Covid. Hence, we recommend developers further explore the feasibility of township developments. Developers should also consider fringe areas for house and lot projects and maximize new infrastructure as Cebu is a major beneficiary of the government’s massive infrastructure push,” Bondoc said.
Metro Cebu remains the largest residential hub outside of Metro Manila, according to Colliers.
With the Covid-19 disrupting the region’s economy and property market, Colliers continues to see subdued take-up and completion of real estate projects in the region.
Demand and supply
In the first quarter this year, 813 condominium units in Cebu were sold in the pre-selling market, down 28 percent quarter on quarter from 1,122 units sold in the last quarter of 2020.
Colliers expects higher take-up over the next three years, and this is likely to be supported by remittances from overseas Filipino workers (OFW) and the Covid-19 vaccine rollout.
In terms of supply, Colliers projects the annual delivery of about 4,760 condo units up from the initial forecast of 4,500 units from 2021 to 2025.
Cebu City and Mandaue City are expected to cover 81 percent of new supply during the period.
By the end of 2025, it sees total condominium stock in Metro Cebu reaching 73,900 units, up 48 percent from the inventory at the end of 2020.
Colliers expects a 4-percent growth in condominium prices this year as it sees demand from investors and end-users gradually recovering starting the second half of 2021.
“We expect prices to grow at a faster rate in 2022 as we project higher take-up from Mactan and Cebu City,” Bondoc said.
Mid-income segment fuels launches and take-up
As of first quarter of 2021, mid-income condominium projects accounted for 38 percent of both launches and take-up in Metro Cebu. The growing demand for this price segment relates to the rising purchasing power of Cebuano end-users and investors.
Colliers expects mid-income projects to continue capturing residential demand in the area as this price segment is expected to deliver about 37 percent of the 6,563 units scheduled for completion in 2021.
“In our view, developers should constantly monitor demand drivers of the mid-income segment, including Filipinos working abroad. The government-projected economic recovery beyond 2021 should further stoke demand from the mid-income market,” the property analyst said.
Colliers believes that as the country continues to manage the challenges brought by Covid-19, investors and end-users from Metro Cebu will likely remain interested in investing on properties within integrated communities.
In the next four years, the global realtor expects the demand for residential projects, both house and lot and condominium units, to likely hinge on integrated features such as the residents’ accessibility to essential goods and services and the proximity to transport networks.
Colliers believes that developers should highlight these features on their residential projects to attract more buyers and investors.
While Cebu City remains the primary site for new residential projects, Colliers has observed house and lot (H&L) developments have begun to expand outside of the city.
In the first quarter of 2021, outlying areas accounted for 61 percent of take-up in Cebu’s residential market, namely the cities of Talisay, Lapu-Lapu, and Carcar.
Colliers encourages developers to continue exploring these areas as well as other parts of Cebu for parcels of land that are viable for future house and lot projects. These include Naga City, Minglanilla, and Balamban.
Similar to Metro Manila, certain factors provide a glint of optimism in the Cebu residential market.
Colliers believes that the competitive mortgage rates (7.4 percent as of first quarter of 2021), flexible payment terms offered by residential developers, and sustained OFW remittances of about USD8.5 billion (PHP408 billion) should help drive take-up beyond 2021.
Data from the Philippine Statistics Authority (PSA) indicated that 5 percent of deployed OFWs in 2019 came from the Central Visayas region.
Similar to Metro Manila, Colliers believes that remittances from OFWs will continue to bolster demand for affordable to mid-income residential condominium units in Metro Cebu.
Prices to grow at a faster pace
In the first quarter of 2021, affordable to mid-income developments (price segments between PHP1.7 million (USD35,400) and PHP6 million (USD125,000) recorded strong take-up for both condominium and H&L projects in Metro Cebu.
Luxury projects accounted for the majority of take-up in lot-only projects. These lot-only projects are priced from PHP2.4 million (USD50,000) and above.
The demand for this price segment in areas outside Cebu City is likely driven by local investors and OFWs looking for bigger open spaces for their families while still within a reasonable distance from the province’s capital city.
Colliers projects prices of condominium units to increase by 4 percent in 2021 as demand from investors and end-users begins to recover gradually.
“From 2022 to 2025, we estimate a 5-percent annual growth in prices as Cebu City further recuperates from Covid. Stable OFW remittances should also support H&L and lot-only price growth,” Bondoc added. (PNA)