Property sales not doing well, says Colliers

PROPERTY developers are likely to post lower profit margins in the near term as they continue to feel the brunt of higher costs absorbed last year, according to Colliers International Research.

In its fourth-quarter Philippine market review, the property research firm said a number of projects are not selling as fast as expected.

“Some bigger than usual back-out rates are also seen in some pre-selling projects. Buyers who bought condominium units for investment purposes are generally the ones likely to withdraw their commitments amid economic instability and unfavorable market circumstances,” Colliers said.

While construction costs have been stable in recent months, the research firm said developers are not yet inclined to rollback prices in pre-selling and planned projects, nor are they leaning towards another major price hike.

Last year, property firms like Vista Land, Megaworld Corp., Filinvest Land Inc., and Ayala Land Inc. raised prices to cope with costlier raw materials

Colliers said the pressure to cut contract prices will be more intense if demand dries up.

“Modest declines in average prices, about 3 percent to 5 percent, at the second half of this year will not be surprising,” it said.

For one, pre-selling and under construction luxury residential developments in Makati and Bonifacio Global City are selling at around P120,000 per square meter, with price increases reflected since August 2008.

The research firm noted that decision-making in the property market slowed down in the fourth quarter of last year amid an unfavorable economic environment.

“Commercial rents and prices declined further, largely due to substantial supply of new office available in the market,” Colliers said.

Land values in Makati Central Business District (CBD) were unchanged at an average of P297,300 per square meter from October to November last year, while in Ortigas it fell marginally to P132,440 per square meter.

“Given weaker real-estate market conditions [buoyant supply and falling office rentals], it would not be unexpected if land values were to tend down during the first half of 2009,” Colliers said.

Rents will continue to fall by around 5 percent per quarter through the first half of 2009 and that by mid-year rents will have fallen by around 20 percent to 25 percent from their 2008 peaks, the research firm said.

In other Asian cities like Singapore and Hong Kong, rents have already fallen by at least 30 percent in the last six months.
— Darwin G. Amojelar, Manila Times