Residential real estate continues its recovery. Colliers\u2019 recently released the 3rd quarter (Q3) 2023 residential data showed condo leasing recovery as expats returned and employees reverted back to on-site work. Numbers show a 1.2% increase in rent and 0.7% increase in prices QoQ. This is focused on three major areas which are Fort Bonifacio, Makati CBD, and Rockwell. <\/p>\n\n\n\n
Pre-selling, specifically for the lower and upper mid-income also showed significant recovery given the 19,100 condo unit take-up (+14% YoY). Collier\u2019s data showed that lower and upper-middle income segments accounted for 73% of condo units sold during the period. Given this data, we remain partial to Ayala Land as their offerings, particularly Avida and a portion of their ALVEO, caters toward demand for this income segment.<\/p>\n\n\n\n
We note however, Collier\u2019s statement that substantial completion in 4Q 2023 and 2024 will likely push rents and prices down. There were only 2 completions for 3Q 2023 which are ALVEO\u2019s Cerca Viento Tower 1 and Federal Land\u2019s Palm Beach Villas. Majority of completions are expected to pick-up during the last quarter of the year.<\/p>\n\n\n\n
This will also likely create a more cautious environment with regards to new project launches. We would expect tempered project launches for property developers come 2024 as they gear their focus towards selling existing inventory.<\/p>\n\n\n\n
Our View:<\/strong> Given the uncertainty of current macroeconomic environment even with continued recovery of resi, we recommend a slow accumulation on Ayala Land (Target Price: P41.67) and then Megaworld (Target Price: P2.87), in order of priority, given their sizeable exposure to the resi segment.<\/p>\n\n\n\n Cautiousness remains as rate hikes may come sooner than expected. We note that the BSP recently released a statement wherein they are considering off-cycle rate hikes which would in turn delay property recovery.<\/p>\n\n\n\n