Condo absorption improves as incentives unlock demand

From AB Capital's The Opening Bell: Three Moves

Event

Metro Manila condo take-up rose 17% QoQ to 8,454 units in 3Q, while unsold inventory declined 3.5% to 80,000 units and months of supply fell to 28 from 34, according to Leechiu Property Consultants (LPC). Promotions and government housing initiatives were key drivers of the improvement.

View

We think the faster absorption is encouraging, although the demand response still appears highly sensitive to affordability and financing support. With roughly 2/3 of unsold units concentrated in the P4-12mn segments, developers may need to keep incentives targeted where inventory pressure remains highest.

Catalyst

The key test is whether take-up can hold as promotions normalize. If quarterly sales stay near 8,500 units and launches remain disciplined, inventory should continue to clear gradually. Higher mortgage costs, weak rental yields and softer household confidence could slow that normalization, particularly in upscale projects.

Action

In our view, this favors developers with disciplined launches, stronger recurring income and financing flexibility rather than those relying on aggressive residential expansion. We would keep RLC as our top property pick (especially with its improved home financing after signing an agreement with the Pag-Ibig fund), while preferring names that can monetize existing inventory without materially sacrificing margins or cash collection.

Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.