Philippines Condo Market: Are Expensive Shoeboxes an Oversupply Issue? Unveiling the Truth (In-Depth Analysis)

In the bustling metropolis of Metro Manila, a housing crisis is looming. The condo market, once a symbol of progress and modernity, has become a source of concern for many Filipinos.

The root of the problem can be traced back to the pre-pandemic boom years of 2016-2018, when many mid-market condos were planned and constructed. Fast forward to 2023-2024, these condos are now turning over, but finding buyers has proven to be a challenge.

One of the key factors contributing to this oversupply is the build-and-sell model followed by developers. This often results in cramped and awkwardly laid out units, failing to meet the needs and expectations of potential buyers.

Moreover, the lack of a robust rental ecosystem in the Philippines is another issue. Rental income is taxed as ordinary income, and there are no incentives for long-term leasing. This has led to a situation where many condos remain unsold, with developers not legally required to disclose these unsold units.

The cultural pressure to own property and a lack of clear ownership strategy also play a role in the condo oversupply problem. Many OFWs and speculative investors bought condos, treating them as fast investments or flipping opportunities, leading to an oversaturated market.

The condo oversupply is particularly concentrated in Metro Manila, particularly the Bay Area. This has led to an income-price mismatch, with average Filipino incomes not keeping up with the rising cost of condos.

The Philippine government has taken steps to address this issue. The Department of Human Settlements and Urban Development (DHSUD) was created in 2019, but by then, the condo boom (2017-2019) had already peaked.

The country also lacks a national system to flag oversupply early. There's no centralised multiple listing and regulatory system, making it difficult to see real-time market signals.

To combat this, Singapore introduced new liveability standards in 2023, requiring at least 20% of all condo units to be 70 sqm or larger, even in high-demand areas. This move aims to ensure that condos are not just mere investments, but also livable spaces.

In light of this, author and wealth coach Chinkee Tan advises potential condo buyers to make sure about their reasons before purchasing. It's crucial to consider not just the investment potential, but also the livability of the unit.

The condo oversupply crisis in the Philippines is a complex issue, with multiple factors at play. However, with awareness and careful consideration, steps can be taken to address this challenge and ensure that everyone has access to a dignified long-term home.

Philippines Condo Market: Are Expensive Shoeboxes an Oversupply Issue? Unveiling the Truth (In-Depth Analysis)