October 16, 2024 | 12:00am
The daily newsletter I get from a stock market analyst reported that “According to Leechiu Property Consultants (LPC), there is now an oversupply of 29 months’ worth of condominium units in Metro Manila.” Leechiu explains the situation is “due mainly to the high interest rates and external risks along with a shift in buyer preferences.”
Specifically, LPC said “there are currently 67,600 units across 510 actively selling buildings in Metro Manila, the highest since the COVID-19 pandemic. Quezon City has the biggest number of available units with 18,500; followed by Ortigas with 13,500; the Bay Area in Pasay with 10,500; Manila with 8,500; and Caloocan with 8,100.”
I assume the inventory will be higher after December 31, the day POGOs are supposed to close according to BBM’s order.
A condo glut is inevitable. Property developers remind me of the “hot pandesal” craze when I was growing up. When someone puts up a hot pandesal business in a neighborhood, two or three more will do the same. Property developers are not thinking of an end user occupying those units when they build them.
Condos are being built and sold as a place to park excess cash. Developers are focused on those able to buy residential units priced between P700,000 and P900,000 per sqm with a total contract price (TCP) ranging from P200 million to about P500 million per unit or even more.
During the pandemic, the high-end segment exhibited resilience. While prices in affordable to lower middle-income residential segments corrected, demand and prices in the luxury and ultra luxury segments held firm. But buyers are also speculators selling to each other in the secondary market. This can’t go on forever.
The current oversupply being reported by Leechiu is not surprising. The spam messages I keep getting from property sales agents trying to sell me a condo unit sound desperate. I had Sunday lunch at Estancia at Capitol Commons in Pasig and sales agents were trying hard to interest me in “investing” in Ortigas condo units across the street.
As we were driving around the Bay area last Saturday for lunch at the Hyatt in City of Dreams, I was astounded by the large number of residential condo units being built but with construction seemingly at a standstill. Who is going to buy all of those units once completed? I am reminded of the ghost cities of China created by property developers who built similar condo buildings with no regard to who will buy them and live there.
China’s economy was badly hit by the bankruptcies declared by these property developers.
I have nothing against condo developments. As a retiree and empty nester, my wife and I find it more convenient to live in a quiet Rockwell development (not in Makati which is crowded) that has excellent security, resort-like amenities like two very large swimming pools, a jogging path, playground, a gym, tennis court and a commercial strip where the two largest banks have branches, also Starbucks, a grocery (Marketplace and a Korean store), a spa, a dental clinic, a nursery school, an art gallery and a number of pretty good restaurants. I am starting to think I no longer need my cars because the basics are a few hundred steps away.
Still, condo living is not for everybody. Those with very young kids can benefit from the convenience and safety offered by condo living. Those with growing families need the space provided by traditional homes. On the other hand, I know of families who have condo units in the city where they stay during the week because it is closer to offices and schools and then go home to Laguna or Cavite on weekends.
Our condo industry developed through the years without sensible central planning. Developers build where they can. LGUs let them do what they want with no regard to basics like impact on road traffic and utilities. The new guys at NAIA were telling me that the Meralco substation which used to just handle the airport load now handles the load of all the condos and hotels across the street as well, causing problems with overload. Meralco is now building a substation exclusively for NAIA.
What is happening in NCR is being replicated in other growth areas. In Cebu, the major players are building furiously as if market saturation isn’t a threat. Same thing in Iloilo, except that in Iloilo, they have OFWs, ship captains and officers buying condos for their families in a planned community where the old airport was. Angeles is starting to attract developers too, probably banking on Clark emerging as the new NCR.
On the whole, I am happy with my condo experience. The management team of Rockwell is doing an excellent job which makes paying the monthly condo dues less painful.
I bought my unit on a pre-selling basis with easy amortizations years before I retired from the Lopez Group. The value of the unit has appreciated significantly. It’s the best investment I have made only because I felt insecure with my home in a gated subdivision where the dugo-dugo gangs have twice victimized our helpers while we were abroad. Now we just lock up our unit when we travel.
But the hot pandesal days of condo development in NCR seems over. The inventory of unsold units plus those being built should take a number of years to unload. Escalating margins are also probably a thing of the past.
In reality, there should be no glut of units if the developers are building for a market need. With BBM’s housing program of a million units a year in limbo, he should ask property companies to help reduce our housing backlog. They should work with the Pag-IBIG Fund and build more affordable units for the middle class. It is a social obligation they are neglecting now.
Boo Chanco’s email address is [email protected]. Follow him on X @boochanco
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