Navigating Metro Manila’s Residential Condominium Market: Oversupply, Challenges, and the Path Forward

The residential condominium market in Metro Manila has been a topic of intense discussion in recent months. As we moved through 2024, it’s clear that the market is grappling with a significant oversupply. With 251 actively selling residential projects and approximately 164,000 units in the primary market, the numbers paint a vivid picture of the current landscape. While 77% of these units have been sold, the remaining 37,700 unsold units along with the continuously growing secondary market highlight a growing challenge for developers and investors.

Understanding the Oversupply

The oversupply is particularly pronounced in the lower-mid segment, where units are priced between PHP 3 million and PHP 7 million. At first glance, this price range seems accessible, but a closer look reveals why these units are struggling to find buyers. For a studio or one-bedroom unit in this bracket, monthly mortgage payments can range from PHP 20,000 to PHP 40,000—a significant financial burden for the average Filipino family earning an average income of PHP 50,000 to PHP 60,000 per month.

Compounding the issue is the fact that, at this price point, buyers can already purchase a 3BR or 4BR house and lot outside Metro Manila. For many, the allure of more space and the flexibility of suburban living outweighs the convenience of a city condominium. Additionally, the rise of hybrid and remote work has reduced rental demand, making condominiums less attractive to investors seeking passive income. With annual yields hovering around 4-5%, many are exploring alternative investment opportunities.

The Factors Behind the Challenge

So, how did we get here? Several key factors have contributed to the current state of the market.

First, rising costs have played a major role. Over the past five years, zonal values in Metro Manila have increased by 40-50%, while market values have risen even higher. At the same time, construction costs have grown by an average of 5-7% annually. To maintain margins, developers have had to raise prices, pushing many units out of reach for the average buyer.

Second, the COVID-19 pandemic has had a lasting impact. The economic downturn led to a decline in consumer purchasing power, while shifting priorities have driven many to seek more spacious living options outside the city. These trends have further dampened demand for condominiums.

Finally, developers have shifted their focus. In 2024, only seven new projects were launched, with many targeting high-end and luxury segments. While this strategy caters to a niche market, it does little to address the oversupply in the mid-range segments.

What Lies Ahead?

Looking ahead, the market faces both challenges and opportunities. With multiple building completions expected in the next three years, the oversupply issue is unlikely to resolve itself quickly. Developers will need to make tough decisions, and price corrections may be necessary to move unsold inventory.

At the same time, this period of adjustment could open doors for innovation. Developers may need to rethink their strategies, whether through flexible payment schemes, enhanced amenities, or targeted marketing campaigns. For buyers, this could be an opportune time to negotiate better deals, while investors may find value in carefully selected opportunities.

According to BSP, overall prices of residential condominium has seen a decline in 2024, suggesting potential recovery in the long term. However, a look at the bigger picture has shown that prices have nearly doubled in 2016. The path forward will require creativity, flexibility, and a willingness to adapt to evolving market?realities.

The Path Forward

The Metro Manila condominium market is at a pivotal moment. While the oversupply presents clear challenges, it also offers opportunities for stakeholders to rethink their approach and align with changing consumer preferences. For buyers, investors, and developers alike, the key will be to stay informed, remain agile, and embrace innovation.

As we navigate this dynamic landscape, one thing is certain: the market will continue to evolve, and those who adapt will be best positioned to thrive.