Property developers… won’t readily admit the rummage sale.
No property developer will concede that a real estate bubble is about to occur in the Philippines soon.
But there are ominous signs that the local market is poised for the property bubble. Nobody just can’t say how loud the bubble would burst.
Prominent property market analysts in the Philippines are seeing and digesting the numbers being reported by developers. They all point to one direction—sales are slowing and inventories are not going down.
Many property developers, as reported in this paper, are quietly slashing prices on unsold inventory in a move that could be described as a “silent fire sale.” Buyers have become cautious and are struggling with rising loan rates and inflation, while developers must contend with an oversupply of residential and commercial properties.
Lovelle Taleon, a director at leading property adviser Santos Knight Frank, said a “silent fire sale” was under way among property developers in a bid to reduce their unsold residential units.
“Regarding strategies to selling out the Metro Manila inventory, I think yes, there is a sort of a silent fire sale that has been happening. It’s a strategy that’s being implemented by all developers. The goal there is to sell it out. They don’t want to be holding on to the property anymore,” says Taleon..
Property developers, however, are a proud lot. They won”t readily admit the rummage sale. They would rather keep the sales under wraps and avoid large-scale advertising campaigns to prevent further market instability.
Property consultant Leechiu Property Consultants (LPC) confirmed the glut. It estimated an oversupply of 29 months’ worth of condominium units in Metro Manila. The demise of Philippine offshore gaming operators (POGOs) largely contributed to the slack in demand,.
With a high unsold inventory, property developers are also expected to significantly cut down their residential launches in the next two years.
DMCI Homes president Alfredo Austria does not see any new project launches for his company in the first half of 2025 given the large number of unsold units in existing developments. DMCI is also not sure if it will launch new projects in the second half of next year.
Higher loan rates for the most part of year and the increased cost of goods and services have dampened demand for residential condominiums in Metro Manila.
Leechiu Property reported a double-digit decline in residential sales in Metro Manila as of November 2024. It noted that that sales take-up dropped 63 percent compared with the full year of 2023, while new project launches were about half of last year’s volume.
Leechiu Property says the tempered market offers an opportunity for buyers, as developers adjust marketing tactics and enhance inventory offerings with value-added features.
Residential condominium sales in Metro Manila in the first 11 months of 2024, meanwhile, accounted for just 63 percent of full-year 2023 levels.
New condominium launches rose quarter-on-quarter in the fourth quarter of 2024 but total launches in 11 months accounted for just half of the full-year 2023 project count, a clear indication that developers were being cautious amid the slower sales environment.
Developers, to get rid of their high inventory, are now offering more flexible terms, such as smaller down payments and extended payment periods. The adjustments make it easier for homebuyers to manage their finances and reduce the immediate burden of large upfront costs.
Metro Manila’s remaining inventory as of the third quarter of 2024, according to property consultant Colliers Philippines, stands at 75,300 units, with an estimated absorption period of 5.8 years, or much longer than the pre-pandemic period when it took just one to two years.
The inventory includes 27,200 ready for occupancy units valued at P154.4 billion ($2.8 billion). Majority of the units are priced between P3.6 million and P12 million and cater to the middle-income market.
The feared property bubble in the Philippines may not happen at all. But if developers continue to price their assets out of range and high inflation and interest rate persist, their trepidation may become a reality.
E-mail: rayenano@yahoo.com or extrastory2000@gmail.com
