Price cut key to clearing PH property backlog, says KMC

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MANILA, Philippines — Property developers will have to lower the prices of their residential condominium units and risk lower margins to address the inventory surplus in Metro Manila, according to real estate services firm KMC Savills.

Joshua de las Alas, KMC director for research, consultancy, and valuations, said during a briefing on Friday that although the average price of condos declined by 14 percent last year, this was already double 2016 prices.

The price drop was due mainly to developers offering discounted packages to sell out their units.

“Inflation rate is one of the main factors … On top of that, construction costs have increased by 5 to 7 percent,” De las Alas noted, adding that the average price was now at P217,000 per square meter.

On average, monthly mortgage rates in the National Capital Region ranged from P20,000 to P40,000.

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Price mismatch

However, De las Alas pointed out that the average Filipino family income earned around P40,000 to P50,000 a month, making it difficult to shell out cash for property on top of spending for necessities.

“Residential prices have increased by almost 100 percent, but salaries have increased by only up to 20 percent,” he added.

This price mismatch made it difficult for developers to sell out their properties.

In its 2024 property market report, KMC found that there were 37,800 unsold condo units in Metro Manila. Of these, 26,500 were in the mid-end market segment, or those priced from P3 million to P7 million each.

While it may be challenging for developers to trim prices, De las Alas pointed out that they still would have to adjust for consumers.

Decentralization

“They don’t need that much margin anyway. It’s better to sell off the units at a lower margin versus not selling off the units at all,” he said.

KMC also found that prospective homebuyers still preferred property in the provinces as a result of high prices in Metro Manila.

De las Alas noted that the price of studio and one-bedroom units in the National Capital Region was already equivalent to the average price of a four-bedroom house and lot in the provinces because of lower land values.

“It could start decentralization, and you can see all these young families starting to live outside Metro Manila,” De las Alas said. “Developers have to cater to that demand.”