It cannot be denied that the country’s residential property market is facing challenges with the oversupply of condominium units in Metro Manila. However, the residential market outside the country’s capital tells another story as various opportunities are seen.
“It is not all doom and gloom for the property market. It is important to highlight that while there is a condominium overhang in Metro Manila, opportunities outside the capital region abound and there are a gamut of recovery enablers that we see lifting the residential sector beyond 2025,” Colliers Philippines Director for Research Joey Roi Bondoc said.
“Outside of the country, we believe that the OFW market is a low-hanging fruit that developers can maximize,” he added.
Supply overhang in Metro Manila
Data from Colliers showed that the remaining inventory in Metro Manila stood at 74,400 units as of end-22. About 26,300 of the unsold inventory are classified as Ready-for-Occupancy (RFO) projects.
“The ready-for-occupancy (RFO) condominium market in Metro Manila continues to face challenges. But while it takes more than eight years to fully absorb the unsold RFO units, it is important to highlight the fact that not all Metro Manila submarkets are affected by the overhang,” Colliers said.
Colliers recommends that developers with substantial number of RFO units offer more specific and curated programs as well as explore creative leasing models.
“We have seen select developers such as Vista Land, SMDC and DMCI offering early move-in promos and discounts for their RFO units. These include up to 30 percent discount on total contract prices (TCPs) for spot cash payment, rent-to-own promos, extended down payment terms of up to 48 months, and lower lump-sum amount before a buyer can move in,” Colliers said, adding that some developers are also offering free aircon and kitchen appliances.
Colliers is also encouraging developers to aggressively target employees who are working in major business districts and highlight their projects’ amenities and live-work-play features.
“Property firms can also form leasing teams to help investors lease their condo units and promote RFO units to the OFW market,” it added.
Upscale and luxury projects lead launches
Colliers recorded the launch of 10,500 units and take-up of 9,100 units in the Metro Manila pre-selling market in 2024. These figures are much lower compared to the pre-selling market’s performance at the height of POGO demand in Metro Manila from 2017 to 2019.
Of the launched projects, Colliers noted that those in the luxury and upscale market accounted for 41 percent of the total condominium launches in 2024, from 20 percent a year ago.
“In our view, high land values, still-elevated interest and mortgage rates, and the increasing prices of construction materials have been compelling developers to launch more expensive pre-selling residential units,” Colliers said.
It added that these segments only cover five percent of the unsold RFO inventory in Metro Manila as of the end of 2024.
“We believe that this should urge property firms to focus on launching upscale and luxury projects in the more established hubs such as Makati CBD, Fort Bonifacio, and Ortigas Center, especially as the mid-income market continues to account for majority of unsold RFO units in the capital region,” Colliers said.
Interest rates cut a tailwind
Colliers noted that the interest rate cuts are a potential tailwind to the Metro Manila condominium market.
“Lower interest rates should result in lower mortgage rates, and these should complement the promos offered by developers,” Colliers said.
In December, the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) slashed policy rates by 25 basis points which brought down key policy rates to 5.75 percent.
Colliers Philippines Managing Director Richard Raymundo said the current interest rates are also affecting affordability in the market.
“The reality is our interest rates right now, our mortgage rates, while it has gone down, it’s not as low as the pre-pandemic, five percent. We’re not yet there. So that also has been affecting the affordability. BSP has said that they’re looking at further cuts again. That’s going to help,” Raymundo said.
According to earlier news reports, BSP Governor Eli Remolona Jr. recently said that they are likely to implement two 25-basis-point cuts this year. This will be done once per semester.
Additionally, Raymundo also noted that another factor affecting affordability in the residential market is the slower increase of salaries of Filipinos.
“The salaries have not increased as fast as the prices. You saw how fast the prices were going up every year. That was more than 10 percent of growth in pricing every year,” Raymundo said.
Opportunities outside Metro Manila
With the challenging situation in the Metro Manila residential market, Colliers said that geographic diversification is pivotal especially now since there is a lukewarm appetite in the capital region.
“We believe that the ‘condo oversupply’ in Metro Manila will likely result in a more pronounced shift to suburbia,” Colliers said.
It added that a number of property firms have announced the expansion of their residential footprint across the country such as VisMin developer Cebu Landmasters Inc. which is allotting P12 billion for its first two Luzon projects which will be a horizontal development in either Batangas or Cavite. The company is also looking at expanding in Camarines Sur.
Similarly, DMCI Homes has recently launched a new condominium development called Kalea Heights, its first residential project in Cebu.
“We recommend that developers carefully assess the attractive product types and price points to offer to the market. It is crucial for developers to address the demand gaps for both horizontal and vertical markets,” Colliers said.
Demand from leisure-oriented projects
Colliers said that leisure-oriented projects will likely boost demand in the residential sector.
“We recommend that developers take advantage of the thriving demand for leisure-oriented properties such as condotels, especially as the government aims to attract more international tourists. In our view, condotels will likely remain as viable investment options as they allow unit owners to make a profit out of their properties by having these rented out to tourists or business travelers who are looking for long-stay accommodations,” Colliers said.
It added that developers should also explore partnerships with foreign brands for their upcoming condotel projects.
Among the recently launched condotels in the country include Megaworld’s Oceanfront Premier Residences in Palawan, DMCI’s Moncello Crest in Benguet, AppleOne Group’s JW Marriott Residences Panglao in Bohol, and Damosa Land’s TRYP by Wyndham in Samal.
Moreover, the professional services firm also urged property developers to highlight the proximity of their residential developments to game-changing infrastructure projects due to be completed in Metro Manila, such as the subway.
“These big-ticket public projects should play an important role in stoking demand in the capital region beyond 2025,” it added.
Despite the condominium overhang in Metro Manila, the opportunities outside the capital region and the gamut of recovery enablers prove that the current situation is not all doom and gloom.
