THINGS are looking bright for the Davao City real estate sector this year as the economy as a whole has begun its recovery from the Covid-19 pandemic.
In a March 3, 2022 report by Colliers Philippines, the residential industry is seen to pick up this year.
"Colliers sees Davao retaining its stature as one of the more attractive residential investment hubs in Mindanao. In our view, Davao’s residential market will continue to benefit from the region’s economic recovery beyond 2022," Colliers said in its report.
Karla Domingo, Colliers Philippines Director for Advisory Services, said during a recent property briefing online that there was a downtrend in the real estate industry in 2020. Aside from the Covid-19 pandemic, the downtrend was also attributed to the series of earthquakes in 2019 and martial law in Mindanao, which was lifted by the end of the same year.
"But we have actually seen an increase of 40 percent in residential sales year-on-year 2020 to 2021. So, you already know that there is a start of recovery in Davao for 2021 and we believe this will continue in 2022 moving forward," Domingo said.
Colliers said the improved situation can be attributed to the "easing of mobility restrictions and economies open." Meanwhile, overseas Filipino workers (OFWs) and investors will continue to drive the demand in the real estate sector in Davao Region.
"In 2020 and 2021 there were challenges that Davao faced that is out of their control. But what we see is when developers launch they get taken up for Davao, those that launch in 2020 and 2021, they are already 57% sold as of end of 2021," Domingo said.
Data showed that in 2021, condominium units sold increased to 841 units from 655 units in 2020. For 2022, Colliers expects that around 1,000 units will be sold by the end of 2022. From 2022 to 2026, it is also forecasted that the annual average of condominium units sold would be 1,700. The steady rise in units sold in recent years will be fueled by regional economic growth and OFW remittances.
Colliers noted that 89 percent of the 841 units sold in 2021 are from the affordable segment. This is higher than the 48 percent take-up in 2020. Units under the affordable segment are priced between P1.7 million to P3.2 million.
"Colliers sees an improvement in demand beyond 2022 and this should play a crucial role in raising property prices and improving the feasibility of alternative sites for residential projects," Colliers said.
However, despite the year-on-year increase in units sold, Colliers said this remains to be significantly lower than the 5,000 to 6,000 units sold in 2018 and 2019, respectively.
"To recapture demand, Colliers encourages that developers offer more innovative discounts, promos, and flexible payment terms to attract more end-users and investors. Some of the innovative promos being implemented in Davao include extended payment terms, discounts on spot down payments, and free appliances," Colliers said.
On the supply side, Davao's condominium stock has increased by 25 percent to 20,535 in 2021 from 16,441 in 2020.
Data from Colliers also showed that "4,094 new condominium units were completed in 2021, higher than the 3,475 units delivered in 2020." These units are coming from Amani Grand Citygate Davao, Camella Condo Homes, Centro Spatial, Maldives Oasis, Patio Suites, The Enclaves Residences, The Residences–Azuela Cove, Two Lakeshore Drive, and Verdon Parc.
"From 2022 to 2025, Colliers sees the annual delivery of about 2,500 units, slightly lower than the 2,600 yearly completion from the pre-Covid period in 2016 to 2019," Colliers said.
While things are looking bright for the condominium projects, Colliers also remains optimistic for the house and lot projects.
"In our view, horizontal projects, which includes lot only and house & lot projects, will remain an attractive investment option among Overseas Filipino Workers," Colliers said in its report.
The research firm urges developers to "look for viable sites in the fringes suitable for horizontal projects including Buhangin and Talomo."
It also observed that house and lot units are "well received by the market and have generated significant sales." These are projects in the Talomo, Buhangin, and Toril areas.
According to their study, the demand in the house and lot market "was also driven by affordable projects with the segment accounting for 73 percent of total take-up in 2021 from 42 percent in 2020."
"The improvement of roads and other public projects should raise the viability of these alternative sites for residential developments," Colliers said.
Colliers notes that "the declining number of Covid cases, easing of travel restrictions, imminent return to office and the government-projected economic recovery of between seven percent and nine percent should support both investor and end-users’ appetite for condominium and house and lot units."
Davao City ranked fourth as the most competitive highly urbanized city in the 2021 Cities and Municipalities Competitiveness Index is also seen to boost investor confidence in the city.
Meanwhile, Colliers said OFW remittances will continue to drive the demand for affordable projects. This is seen to be sustained over the next 12 to 24 months. Data from the Bangko Sentral ng Pilipinas (BSP) showed that remittances grew by 5.1 percent in 2021 to US$34.8 billion (P1.6 trillion) from $33.2 billion (P1.5 trillion) in 2020.
"Davao will still remain to be the preferred residential investment hub of Mindanao, given key indicators and upcoming infrastructure projects. Current market conditions have led to a shift in demand for affordable products. There was also increased interest for horizontal developments, though opportunity remains for condominium developments with the right product, pricing and innovative payment terms,” Theresa Teodoro, Colliers senior director for Advisory Services, said in a statement.