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A broader look at today’s business
CONDO CONUNDRUM WHEN HOME PRICES SOAR
www.businessmirror.com.ph
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Sunday, January 26, 2025 Vol. 20 No. 106
P25.00 nationwide | 4 sections 20 pages | 7 DAYS A WEEK
NEIL BUSSEY | DREAMSTIME.COM
AS HIGH AS THEIR BUILDINGS
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By Rizal Raoul Reyes
O doubt about it, there’s a huge inventory of condominium units in Metro Manila, primarily because they have become more expensive and more difficult for middleclass Filipinos to acquire.
“Interest rates are rising. Land values are in fact not going down but rising. Prices of construction materials are increasing, even reaching a 14-year high in 2022. Then you have the Philippine Offshore Gaming Operators (POGOs) demand for condo units that the developers took advantage of, which resulted in the jacking up of prices of the properties,” Colliers Philippines research director Joey Roy Bondoc told the BusinessMirror, by way of looking back at the confluence of
factors that led to this situation. According to Colliers Philippines, there are a total of 70 months of inventory of condominiums in Metro Manila. In a phone interview on Thursday, Bondoc added that even middle-level executives face challenges with elevated mortgage rates, making it difficult for them to purchase these units. With the entry of POGOs, Bondoc said developers readily seized the opportunity to cope with the demand, and this partly
accounted for the overpricing of condominium units, especially in the Bay Area, from 2016 to 2022. These years happened to be the peak of the POGO sector in the country. According to Bondoc, the developers overbuilt during the 2017-2019 period. From a high of 45,000 to 50,000 units, Bondoc said it dropped to less than 20,000 units or a little over 10,000 units in the 2023-2024 timeframe. Per Leechiu Property Consultants, POGOs have recorded 274,000 sqm of vacated spaces for fiscal year 2024 attributed to the ban.
Miscalculation
KMC Chairman Michael McCullough thinks it was miscalculation or over-optimism by the developers that led to the glut. “Looking back, it appears that a combination of over-optimism, market miscalculations, and bad timing contributed to the current inventory levels. The pandemic’s impact on the economy and buyer behavior was underestimated [de-
mand went outside of Metro Manila], leading to an oversupply in certain segments. Moving forward, developers should adopt a more data-driven approach to market analysis and project planning. That is, if they will even listen to our professional advice,” McCullough said in an interview with the BusinessMirror via LinkedIn.
Going outside Metro Manila
NEVERTHELESS, Bondoc said developers have managed to pivot as they are now targeting leisurecentric, hotel-centric and resortthemed developments. He also pointed out that developers have learned that projects outside Metro Manila have good potential as preselling units are being taken up by buyers in a single day. In a press briefing on Wednesday, Claro Cordero Jr., Cushman and Wakefield Philippines’ director, head of research, consulting and advisory services, told reporters there are more than 250,000 units of condominiums outside Metro Manila.
MARKET SHIFT TO HORIZONTAL DEVELOPMENTS More than 250,000 condo units outside Metro Manila.
TOP REGIONAL MARKETS: Metro Cebu: 53% share n CALABA corridor: 22% share n Metro Davao: 12% share n
“Definitely, it’s more for the horizontal developments because of that demand for more space,” Cordero pointed out. Cordero also noted the growing number of buyers of horizontal homes outside Metro Manila. He said this group of buyers probably got tired of condominium living and wanted a bigger area for their family so they can have more space for their kids to roam around. “That should easily grow to about more than 85,000 units in the next five years.”
Beyond the NCR
ON MARKET MISCALCULATIONS BY DEVELOPERS: “Looking back, it appears that a combination of over-optimism, market miscalculations, and bad timing contributed to the current inventory levels. The pandemic’s impact on the economy and buyer behavior was underestimated.”— Michael McCullough, KMC Chairman
RIGHT now, developers such as Ayala Land Inc., Megaworld, Rockwell Land, Aboitiz Land, Vista Land, Century Properties, Santa Lucia Land Inc. and PHirst Homes have pursued their own development projects in Batangas, Laguna, Cavite, Batangas and even Palawan. Cordero said these regional developments will offer a different set of amenities and experience, Continued on A2
PESO EXCHANGE RATES n US 58.6410 n JAPAN 0.3758 n UK 72.4392 n HK 7.5285 n CHINA 8.0500 n SINGAPORE 43.2679 n AUSTRALIA 36.8559 n EU 61.0863 n KOREA 0.0409 n SAUDI ARABIA 15.6343 Source: BSP (January 24, 2025)