Housing glut or backlog?

As the global trade or tariff war rages on, the uncertainty mounts. Sadly, it is driven solely by one person’s mood and rhetoric. Well, by the guy named Donald Trump. We can mirror this from how stock exchanges or bourses (globally) react. If he pauses the execution of the tariff, the stock markets go up. When he raises it, the bourses go down. Likewise, when he was insinuating that there was an ongoing talk with China, the bourses performed better. Then, when China labelled it as “fake news,” the bourses went down. Indeed, Trump-driven, that’s how this trade war is characterized.

Though our own stock market is influenced a bit by this uncertainty, it isn’t that severe.  Afterall, as our trade surplus with the USA is minimal, we are slapped with a lower tariff of just 17%?

However, if we must talk about uncertainty, it should be the country’s real estate industry.

To recall, as POGOs were on the rise, the demand for condominiums in Metro Manila surged.  Thus, developers responded correspondingly. Now that they are gone, we are seeing a lot of units empty.  According, to Colliers Philippines, “Metro Manila’s condominium oversupply reached a record high last year, with unsold units expected to take over eight years to be fully absorbed by the market.” That “unsold units surged by 77% in 2024 to P158 billion worth of inventory, up from P89.6 billion in 2023,” Colliers Philippines Director and Head of Research Joey Roi H. Bondoc said during a briefing earlier this year. That “at the current market absorption rate, it would take up to 8.2 years, or 98 months, for these units to be sold, compared to just 3.2 years in 2023,” he added. Indeed, that “Metro Manila’s overall residential vacancy rate reached 23.9%”, as reported, is a fact. However, we must also emphasize that this is only true on certain demographics.

Why? We must put forward the fact that the country’s housing backlog is alarming. A report by UN-Habitat “estimates that housing need in the Philippines is projected to increase from 6.5 million to 22 million by 2040. Also, an official of the Department of Human Settlements and Urban Development (DHSUD) “foresees the housing backlog in the country to reach the 10-millon mark by the end of President Marcos’ term in 2028.”

Though a sizeable number of these backlogs are attributed to the informal settler families living in slums and high-risk areas in Metro Manila and are therefore dependent on the government’s housing programs, those who are gainfully employed are still substantial.  It is just that these housing backlogs are spread all over the country.

These reports are well validated by the preliminary data from the Philippine Statistics Authority (PSA).  According to the PSA, “construction activities in the Philippines are slowing down as the number of building permits approved nationwide dipped by 2.5 percent in February.” It showed that “the number of construction projects from approved building permits declined to 14,440 in February from 14,809 in the same month in 2024.”

The total value of construction projects also “fell by 16.9 percent to P41.6 billion in February from P50.05 billion in the same month last year.” This is largely influenced by “the non-residential construction projects which declined by 4.7 percent to 3,290 from 3,454 projects.” In terms of value, “non-residential projects dipped slightly to P21.29 billion from P21.39 billion.”

Notably, however, of the total value of P41.6 billion, “residential buildings accounted for the biggest share at 63.9 percent.” This represents 9,223 residential projects in February, up by 1.2 percent from 9,115 projects in the same month a year ago.  It is noteworthy that while the number of residential building projects increased, the value fell by 24.9 percent to P17.38 billion from P23.13 billion.

What does this mean? First and foremost, that there is an increase of 1.2 percent in residential projects from the previous year means that, indeed, the demand did not just exist, it is rising. That the value fell to P17.38 billion simply means that this uptick is driven by a certain demographic. Those buyers who are willing to buy at prices below P2,000,000 per unit.

So, is there a glut? Yes, for condominiums in Metro Manila (including high-end units) priced way above P2,000,000 per unit. That there is a backlog for housing or condominium units (especially, Medum-Rise Buildings) priced within the P2,000,000-range inside and outside of Metro Manila remains a fact.