Manila condo oversupply: Bad news and good news, especially for OFWs

Manila: The Philippine capital is grappling with a significant surplus of condominium units, mostly in high-rises.

There's bad news and good news.

Unsold unused condo units spiked by 77 per cent in 2024 to Php158 billion ($2.72 billion) worth of inventory, up from Php89.6 billion ($1.54 billion) in 2023.

At the same time, Manila remains among most expensive cities to live in Southeast Asia.

While condo market here faces a challenging oversupply, it is not a crisis without solutions. 

Some ideas being floated include adapting to the tune of the season. One is by lowering prices; another is by repurposing assets, and shifting focus to more sustainable, high-demand markets.

If they do, the property sector could see a healthier recovery in the coming years, say industry experts.

But: will developers do it or will buyers jump in?

In a market-driven scenario, it's anyone's guess who will blink first.

Meanwhile, local authorities continue to find ways to solve the decades-old traffic situation in the capital.

A congestion charge, where end users pay for every pass on a busy road, has been proposed. That plan, however, hit the brakes fast — politicians shut it down quicker than a red light.

Why?

Well, it's election season. And messing with commuters’ wallets is a one-way ticket to losing votes.

Still several other key factors have contributed to the condo oversupply situation.

The elephant in the room, however, is cost.

As of October 2024, the Philippine capital faced an oversupply of approximately 67,600 condominium units across 510 actively selling buildings, equating to a 29-month inventory, Leechiu Property Consultants (LPC) reported.

Then, by end-2024, condo units gathering dust surged by 77 per cent to Php158 billion ($2.72 billion) worth of inventory. That's up from Php89.6 billion ($1.54 billion) in 2023, as per Colliers Philippines Director and Head of Research Joey Roi H. Bondoc.

The average Filipino wage earner, however, finds these high-rise units beyond reach. Even middle-class buyers struggle with rising prices and financing challenges. 

High interest rates further exacerbate the issue. Colliers' Bondoc told BusinessWorld:

“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 estimated in December 2024 that it would take 70 months to absorb the existing inventory of Metro Manila condominiums. By February 2024, that number had worsened to 8.2 years (98.4 months).

A 2021 study estimated that the total monthly cost of living in Manila, including rent, food, and transportation, reached Php50,800 ($847). 

In contrast, public school teachers’ salaries range from Php27,439 ($472) to Php38,150 ($653), making homeownership challenging even for someone with a master's degree. 

Even middle-level executives face challenges due to elevated mortgage rates.

Another significant factor in the oversupply mess: the high price of land. The entry of POGOs from 2016 to 2022 led to a surge in demand, and developers responded by overpricing units, especially in the Bay Area.

Bondoc noted that developers overbuilt between 2017 and 2019. Condo supply peaked at 45,000 to 50,000 units annually before plummeting to just over 10,000 units in 2023-2024.

Leechiu Property Consultants reported 274,000 sqm of vacated POGO spaces in 2024, adding to the property glut.

Given the tough traffic situation in Metro Manila, and the delays in the rollout of public transport infrastructure, developers are now pivoting towards leisure, hotel, and resort-style projects, as well as expanding outside Metro Manila.

Cushman and Wakefield Philippines’ Claro Cordero Jr revealed that there are over 250,000 condo units outside Metro Manila, with demand shifting towards horizontal developments in provincial areas.

“Buyers are likely getting tired of condo living and want more space for their families. We expect more than 85,000 horizontal units to be built in the next five years.”

Key areas attracting developers include:

Metro Cebu has taken the lead, with 53 per cent of new developments, followed by the Cavite-Laguna-Batangas (22 per cent) and Metro Davao (12 per cent).

1. Adjust pricing and incentives

Property industry experts suggest drastic pricing adjustments, possibly slashing condo prices by 20-40 per cent while offering flexible payment terms (10-15 years) and incentives like free interior design or fully-furnished units.

2. Target the OFW market

Bondoc recommends developers tap into the strong overseas Filipino workers (OFW) market, which benefits from steady remittances. Extending preselling down payments to 84 months could make units more affordable.

3. Strengthen bank-developer partnerships

Property experts believe banks and developers should do more, emphasizing the need for better collaboration between them to streamline financing, offering pre-approved loans and exclusive mortgage deals.

4. Repurpose vacant spaces

Landlords with vacated POGO spaces should consider converting them into co-working hubs, schools, recreation centres, or mixed-use developments to attract new tenants.

5. Focus on sustainability and smart homes

With increasing environmental awareness, developers should incorporate sustainable, energy-efficient, and smart home technologies to appeal to modern buyers. With government guidance, this may include investments in district cooling, water treatment facilities and in sewage treatment plants.