Horizontal trumps vertical for residential dev’t in Iloilo

Horizontal trumps vertical for residential dev’t in Iloilo
Amid the realty development boom these past few years, the Iloilo City skyline as shown here in January 2019 still has a lot of room for horizontal development. Photo File by THEPHILBIZNEWS

Demand for Iloilo House & Lot still dominant, but condominium sales to pick up

Iloilo’s residential market is still primarily horizontal (house and lots) although Colliers is seeing a growing attractiveness in condominium living especially in the city’s major business district.

To take advantage of the thriving Iloilo residential market, Colliers encourages developers to launch affordable and mid-income condominium units as these are the most attractive to Iloilo City households and investors; explore areas outside of the business district feasible for mid-rise condominiums; align developments with key infrastructure projects; and consider developing new condominium projects within townships located in the city’s business district.

Key business hub in the Visayas

Iloilo City is part of Western Visayas, which is one of the fastest growing regions in the Philippines. According to the Philippine Statistics Authority (PSA), Western Visayas’ economy expanded by 6.1% in 2018. The services sector, which covers outsourcing activities and stokes demand for modern residential accommodations, accounts for about 58% of the region’s economy, followed by the industrial sector (e.g. manufacturing and construction) which covers 25% of the region’s annual economic output. Economic activities in Iloilo continue to thrive, making it a residential hotspot in the region.

Iloilo’s residential market is primarily horizontal with about 22,000 units at the end of 2018. Meanwhile, there are only about 2,170 vertical or condominium units at the end of 2018.

Iloilo City’s condominium stock remains small compared to the horizontal segment, but we see a more aggressive launch and completion schedule moving forward given the rising viability of condominium living, especially within the city’s main business district. From 2019 to 2021, we see the completion of about 500 condominium units per year. This is higher than the 470 units delivered annually from 2016 to 2018.

The bulk of the new supply from 2019 to 2021 is likely to be within Iloilo City’s business district. Megaworld’s Iloilo Business Park will probably account for about 54% of the new units during the period. Among the property developer’s projects due to be delivered during the period are Saint Honore and The Palladium, the first upscale development in Iloilo with an average price above PHP6.0 million (USD113,200). Other notable projects include Ayala Land’s Avida Towers, Sta. Lucia’s Soto Grande Iloilo, and Filinvest Land’s One Spatial.

Economic and affordable segments dominate

In 2018, economic projects with prices ranging from PHP450,000 (USD 8,500) to PHP1.7 million (USD 32,100) accounted for 50% of total horizontal take-up. This is higher than the segment’s 34% share in 2017. The affordable segment’s share reached 48%. We see economic and affordable units driving the demand for Iloilo City’s H&L segment in the next three years.

In the condominium market, about 400 condominium units were taken up in 2018, up from 350 in 2017. From 2019 to 2021, we project an annual take-up of about 400 units. The affordable segment accounted for 53% of total take-up in 2018 followed by the mid-income category. From 2019 to 2021, we expect these segments to continue driving condominium demand.

Overall, condominium units in the city remain an attractive investment option for OFWs. However, OFWs choose to live in H&Ls around the peripheral areas of Iloilo’s business district as they still prefer to own individual lots with large open spaces for their families.

Launch affordable and economic projects

Developers should continue launching residential projects within the affordable PHP450,000 (USD 8,500) to economic PHP3.2 million (USD 60,400) range as these are the most attractive to Iloilo City households and investors.

Look for alternative house and lot sites

Outside of Iloilo City, areas such as Pavia, Laganes and Sta. Barbara remain attractive for house and lot projects. Colliers encourages developers to start acquiring parcels of developable land in these thriving residential sites.

Align with upcoming infrastructure

Developers should also anticipate the infrastructure projects that both city and national governments intend to implement over the next two to three years. Residential developers should maximize the opportunities these projects present and align their plans for vertical and horizontal residential projects. Colliers encourages developers to explore the viability of land around the proposed monorail project that is likely to traverse from Ungka to City Hall, Jaro to City Center and Mohon to City proper for condominium projects, while parcels of land near the Panay-Guimaras-Negros bridge should further be assessed for house and lot developments.

More condominiums in the business district

Colliers believes that condominium projects in the city’s business district should remain attractive, hence we encourage developers to consider launching more condominium projects within their townships, especially in light of the scheduled completion of new office buildings and universities.

The Iloilo Business Park, for instance, continues to attract major outsourcing companies and we see foreign workers as well as local employees contributing to the surge in residential demand in the thriving business hub. Overseas Filipino Workers (OFWs) are also drawn to the viability of the business district and are enticed to buy condominium units that they intend to lease out once completed.

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