Poor business model

The Metro Manila condo oversupply, now equivalent to 34 months, is not surprising.

- BOO CHANCO

Indeed, anyone with some brains would have expected it to happen.

The country's condo industry is supply-driven. They build without thinking who will buy all their units. Notice how in malls, nicely dressed agents annoyingly try to sell condos like sidewalk vendors.

Their focus on the speculative buyer who buys "for investment" is dependent on a lot of factors including how buoyant the economy is and if interest rates remain affordable.

The POGOs encouraged more speculation. The pandemic, rising interest rates and the scuttling of POGOs crashed the assumptions of the business model of our property sector. Now, the property developers have more unsold units than they want. Hopefully, they don't end up like some of the ghost cities I saw in China. Chinese developers built all those high-rise condo buildings with a bahala na attitude. They were getting easy credit to build so they built. Then, the bottom fell.

According to data provided by Leechiu Property Consultants (LPC), it will take 34 months for the current supply of condo units to be sold, given the prevailing sales pace. Leechiu Research director Roy Golez Jr. explained how they crunch their numbers.

"What we do is we track monthly and quarterly, so the availability of units suddenly shot up. It increased, meaning they were re-released into the market. These were already either blocked off because there was a down payment but the transaction did not push through, mostly that."

Our property developers are building ever taller condo buildings in the metro area seemingly oblivious to the existence of a market. The Bay Area, where the big casinos are, is becoming a ghost community of unoccupied condo buildings.