Philippines: Condo oversupply, or overpriced shoeboxes? What's really happening (long read)

Manila: "Don't buy a condo, there's an oversupply."

You've probably heard that, or maybe these lines get thrown around a lot.

Is the real estate industry here in a pickle?

Author and wealth coach Chinkee Tan tells investors there's no need to panic.

Instead, he tells people to bone up with the right information, get themselves educated to remove fear.

His advice: "If you're buying a condo unit, make absolutely sure about your reasons."

Tan, author of 15 books on finance (including the Diary of a Pulubi), cites data from Colliers pointing to a 98-month (eight-year) worth of condo inventory (about 90,000 unsold units). Many in the industry call it an "oversupply" situation.

Tan says it's not a simple supply-demand imbalance; rather, it's more of a market "mismatch", for which there are no shortcut solutions.

"If you ask: Why is demand down? I don't totally agree that there's an oversupply of condo units," said Tan, "because maraming pang Pilipino ang walang tahanan (many Filipinos do not own a house). If you ask a person currently renting: 'would you like to have your own home near your workplace, 99% of the time, they would say 'Yes'," said Tan.

He adds: "I believe, maraming (many) condo (units) are overpriced. If they make it affordable, I believe maraming kukuha (many will buy)."

Fact: The Philippines currently has a 6.5-million housing backlog, according DHSUD. A Dela Salle University (DLSU) study gives a higher number, at 8.5 million, which is expected to balloon to 11.2 million by 2030.

Tan was reacting to Me-Ann Clemente, a Manila-based licensed real estate broker and appraiser and vlogger.

Condo oversupply happens when there are more condominium units available than people buying or renting them.

A look at the numbers shows the oversupply situation only in specific segments and areas: Colliers figures that based on how fast units are being sold, the estimated "absorption time" is 98 months.

Leechiu Property Consultants is a bit more optimistic; they estimate around 38 months.

What it means: even if developers stop building, it would take three to eight years to clear the current supply.

After years of aggressive expansion and speculative buying, experts say we're currently undergoing a correction phase.

What this means: If you know how to navigate the cycle, there are opportunities to latch on to.

Here's the interesting part: The glut is not a nationwide problem.

The oversupply is concentrated in Metro Manila, particularly the Bay Area, which boomed pre-pandemic because of strong demand from POGO tenants and investors.

Quezon City, Alabang, Las Piñas, Pasig City, and the Makati fringe areas also experienced a wave of mid-range condominium projects built all targeting the same market — young professionals and investors.

With many of these projects being handed over at the same time, oversupply followed.

"So what we're seeing is oversupply in areas where developers built too many condos for specific buyers who didn’t fully show up. In short, the market was overbuilt relative to demand. If we don’t learn from this as buyers, sellers, investors, or even as an industry, there’s a real chance the same pattern could happen again in other cities and provinces," said Clemente.

A lot of this has to do with how the system is built.

Oversupply is not just about developers building too much — it goes deeper than that.

Let’s break down the biggest systemic issues surrounding the shoebox-sized condo market glut in Metro Manila.

The country has property laws, but no law defines what a dignified long-term home should look and feel like, especially in high-rise communities. The industry relies on the good-old Republic Act No. 4726, or the Condominium Act of 1966.

Because those laws haven’t been updated for today’s urban reality, developers treat them as the default benchmark — even for prime high-rise condos. This isn’t ideal for long-term living, given the country's current infrastructure and building standards.

That’s why some foreign observers describe these units as “shoeboxes” or even “prison cells with windows.”

Harsh, yes — but it highlights the gap between what’s allowed and what people actually need.

Time for a tweak in the law? Perhaps. In contrast, Singapore in 2023 introduced new liveability standards: at least 20% of all condo units must be 70 sqm or larger, even in high-demand areas. Meanwhile, in the Philippines, 20–30 sqm studio-type layouts still dominate.

In other countries, a centralised MLS (multiple listing system) allows developers to see real-time market signals. In the Philippines, developers launch projects based on past sales trends or internal projections, not actual demand.

Feasibility studies are often too optimistic, and there’s no national system to flag oversupply early.

Worse, developers aren’t legally required to disclose unsold units. Buyers may think projects are “sold out” when in reality, inventory remains hidden.

Currently, there's no centralised real estate regulatory authority that keeps tabs of the following:

Going forward, this is a key challenge: An updated set of rules to provide regulatory oversight for the real estate sector, protect investors and ensure market transparency using the latest available technology.

It wasn’t until 2019 that the Department of Human Settlements and Urban Development (DHSUD) was created to oversee housing and planning. But by then, the condo boom (2017–2019) had already peaked.

Once a project is approved and funded, it’s nearly impossible to stop mid-construction, even if demand shifts. Many mid-market condos turned over in 2023–2024 were planned back in 2016–2018, during the pre-pandemic boom.

Compare that to Malaysia, where the Johor state government froze new approvals in 2015 for certain unit types and required updated feasibility studies. The Philippines lacks that proactive system.

Most major developers in the Philippines follow the build-and-sell model: design projects to maximise saleable floor area, launch early to secure preselling buyers, recover investment quickly, and fund the next project.

The problem? Many of the units — especially studios — are cramped and awkwardly laid out (shoeboxed). Developers market amenities as a substitute for livable private spaces. These projects keep getting launched to meet sales targets, not because of real, sustainable demand for so many small units.

Some sales agents and even referral partners recruited under the developers’ network promote condos with a rent-to-own style pitch.

Rent-to-own means buyers are paying monthly like rent just to cover the down payment, but they still don’t own the unit until the bank loan is taken out at turnover.

On the surface, for example, a studio at ₱15,000 per month feels way more reachable than a two-bedroom at ₱50,000 per month. But behind that affordability, buyers who go for a studio pay a higher per-square-metre cost for a unit that isn’t truly livable in the long term.

Many developers — before PRC rules were strictly enforced— used commission-based sales agents and referral partners who were not always licensed, accredited, or properly trained to explain the long-term costs or pre-qualify buyers.

They were pressured to close a reservation fast, not to educate the client. And that still goes back to the developer, whose push for fast sales targets ends up contributing to the oversupply.

POGOs were a big deal, but you might not realise how exactly their demand fuelled Metro Manila's condo oversupply. Their presence brought easy profit to investors and landlords. They paid premium rates—often double what local families could afford.

For example, if the market rental rate for a one-bedroom condo was ₱30,000 per month, POGOs were willing to pay ₱60,000 upfront in cash. While a local renter might pay one month advance and two months deposit, POGOs typically paid a full year in advance.

Some POGO firms even bulk-leased multiple condo units — or entire floors — with minimal requirements. These practices attracted investors to buy more units, hoping to rent them out to POGOs or flip them for a profit.

Some POGO workers even bought condos themselves, then resold them.

Since demand was so strong, developers kept building. Some good things never last. When POGOs left, all those studios and one-bedrooms lost their anchor market almost overnight. Local families typically look for bigger, more flexible spaces, and mid-market prices remain too high for the average Filipino household.

Another driver of oversupply came from OFWs and speculative investors. Many OFWs bought a condo (or multiple condo units) because it's "uso" (i.e. trending).

Many mid-market buyers treated condos as fast investments, not homes. Condo flipping was the goal — buy at pre-selling, then sell before turnover for a profit.

The problem was, many buyers skipped proper market research or financial planning. When too many owners tried to sell or rent the same type of unit at the same time, the market became oversaturated.

Worse, some speculators weren’t financially prepared, making it harder for them to sustain loan payments or access bank financing, especially with higher interest rates.

After the pandemic, home loan interest rates shot up. Before 2020, you could get a housing loan at around 5%. But by 2023–2025, rates rose to 6–7.5% after the Bangko Sentral ng Pilipinas (BSP) hiked policy rates to fight inflation.

That meant stricter bank approvals. In-house financing wasn’t much better, with 12% or higher rates and only 5–10 year terms—too heavy for most buyers.

Imagine this: a buyer reserved a ₱3 million condo before the pandemic. At 5% interest, the monthly amortisation was about ₱20,000. By 2023, with a 7% rate, it jumped to ₱23,000. That difference forced many buyers to default, leaving units reserved on paper but never truly absorbed by the market.

Condo prices have been rising steadily for the past decade, due to speculation, and high cost of money. There's also a problem of overconcentration of the high-rise condos built in Manila.

On the other hand, average Filipino incomes haven’t kept up. According to the PSA, the average Filipino family income is about ₱25,000–₱30,000 per month.

Basic studio units in Metro Manila now cost around ₱3 million, which means monthly payments of ₱20,000–₱23,000. That’s nearly all of a family’s take-home pay. Even with multiple earners, a small studio is simply too cramped for a typical family of four or five. It just doesn’t make sense for long-term living.

For millennials and Gen Z freelancers, condo living could actually make sense since their households are smaller. Many freelancers even earn two to four times more than salaried employees.

But banks still see freelancers as risky due to irregular income and lack of formal pay slips or declared tax returns. Even those with the means often fail to get loan approvals, which prevents them from helping absorb the oversupply of mid-market condos.

The Philippines still has a weak rental ecosystem. Rental income is taxed as ordinary income, with no incentives to encourage long-term leasing. As a result, many condo owners turn to short-term platforms like Airbnb, chasing higher daily rates despite the risks.

By contrast, Thailand allows landlords to deduct property expenses, repairs, and insurance from rental income, while Malaysia allows up to 10% of renovation costs as tax deductions. Meanwhile, property management in the Philippines remains fragmented, making it difficult for OFWs to manage long-term tenants from abroad.

When condo owners decide to sell, they face another hurdle: weak exit infrastructure. Unlike mature markets, the Philippines has no institutional bulk buyers or buyback programmes for secondhand residential condos.

Resale buyers mostly rely on bank financing, which has strict requirements, so listings for resale condos — especially studios and one-bedrooms — can sit on the market for 6 to 18 months or longer.

Result: even more inventory gets trapped and the oversupply situation worsens.

In Filipino culture, property ownership is a badge of success. Renting is often seen as “wasted money,” which pushes people to buy impractical condos or distant lots that are difficult to resell or live in. This cultural mindset adds to oversupply by encouraging ownership without regard for long-term suitability.

Many buyers, especially reselling investors, jump in without a clear goal. Is the unit meant for flipping, renting, or personal use?

Without a solid plan — plus an emergency fund and long-term financial preparation — many end up stuck with units they can’t sustain or resell.

Those are the key drivers behind condo oversupply.

The Philippines faces a major housing challenge. There are no shortcut solutions, as building takes time. More fundamentally, policy tweaks can move painfully slow through the Philippine legislative mill.

The Housing and Urban Development Coordinating Council (HUDCC) underscores the scale of the crisis: the huge housing backlog, at 6.5 million units (as of 2023), needs to be addressed via a whole-of-government approach.

How?

First, by basic engineering solutions: Many low-cost options are situated in hazardous or flood-prone areas. This presents both a socioeconomic challenge and an opportunity for transformative action.

Second, resolving this issue demands a robust strategy, similar to how the government tries to address insurgency, separatism, the Manila traffic mess (by expanding public transport) and theft of public funds (by fixing DPWH and jailing erring contractors), and by going to the root of the problem, a.k.a. taking a "first principles" approach.

Third, by updating the 1966-era condo legislation, and mandating reliable and updated data sets.

Fourth, it should integrate innovative financing to address the double opportunity of shortage in affordable housing and the condo glut.

Paul Pajo, a researcher from De La Salle University, estimates that eliminating this backlog through Pag-IBIG-funded housing, with an average cost of ₱800,000 ($13,600) per unit, would require a staggering ₱8.93 trillion ($151.81 billion) investment (Pajo, 2023).

In contrast, the average 27 sqm condominium unit in Manila is valued at approximately ₱3.5 million ($61,306), based on data from the Bangko Sentral ng Pilipinas (BSP, 2024).

Allocating the $151.81 billion to condo units would yield only 2.5 million units, leaving a shortfall of 4 million units, even if all vacant condos were occupied (plus more).

This gap highlights the need for a strategic overhaul.

By leveraging innovative financing models — such as expanding Pag-IBIG’s affordable housing programmes (good move, needs further scaling), boosting mass transport infrastructure (right-of-way snags need urgent resolution), incentivising private sector participation, i.e. building high-rises/tenements via public-private partnerships on government-owned/acquired land — and adopting a smart approach that coordinates government, developers, and communities, the Asian country can simultaneously tackle the housing backlog and condo glut.

The evidence and numbers are clear: a unified, decisive effort is essential to deliver sustainable, accessible housing for millions while optimising existing urban resources.