Is buying a condo still a smart move in 2025, or is the oversupply of units making it a risky gamble?
The residential real estate market is grappling with pressing issues. Oversupply has left many units unsold. Rental prices are falling, and there’s a noticeable disconnect between what’s available and what buyers need. Post-pandemic shifts in property values and rental demand have reshaped the investment landscape, forcing both seasoned and first-time buyers to reassess their strategies.
Understanding these changes is essential for making informed decisions. In this article, let’s take a closer look into the current state of residential property prices and the factors shaping investment decisions to help you determine whether a condo investment makes sense in today’s market.
Current State of the Residential Property Market
Metro Manila’s condo market is grappling with an oversupply problem. With around 75,300 unsold units and a 5.8-year absorption period, it’s clear that developers are struggling to find viable buyers. A mismatch between what developers offer and what the market demands makes this situation even more complicated, especially in the middle-market segment, where properties priced between ₱3.6 million and ₱12 million are experiencing the biggest slowdown.
Rental rates have been declining steadily, while vacancy rates continue to climb. In areas heavily reliant on POGO tenants, such as the Bay Area, these issues are more pronounced. With vacancy rates soaring, it’s clear that the market is yet to regain its pre-pandemic momentum.
Residential Property Price Trends
Despite the challenges, property prices are still expected to grow at a rate of 2.2% annually through 2026— this number is sluggish, yet still a modest pace considering issues like the oversupply. Within Metro Manila, the residential market has contracted significantly, with a 15.6% year-on-year price decline in Q3 2024. On the other hand, areas outside NCR, such as Davao and Calabarzon, are showing resilience, with year-on-year growth of 3%.
Interestingly, high-end condos continue to hold their value better than middle-market properties. However, rising vacancy rates—projected to reach 24.9% in NCR and a staggering 53% in the Bay Area by 2025—are putting pressure on overall price stability.
Factors Influencing Residential Property Prices
Several factors are driving residential property prices in 2025. Oversupply, shifting buyer preferences, and economic conditions are shaping market trends. Let’s break down how these elements impact property values.
Demand: Oversupply and reduced loan availability have driven down demand, especially for middle-market condos. Developers are finding it difficult to sell units, leaving inventories stagnant.
Location: Buyers are shifting their focus to suburban developments and single-detached homes. Suburban areas offer more space, better affordability, and increasing potential for long-term value appreciation.
Economic Conditions: Recent interest rate cuts by the Bangko Sentral ng Pilipinas (BSP) are expected to improve affordability and market activity. However, the broader economic recovery remains slow, leaving developers to grapple with costly recovery efforts and flawed market research.
Is Condo Still a Good Investment in 2025?: Insights for Potential Buyers
While the condo market in Metro Manila may seem challenging, opportunities actually exist for strategic buyers. Suburban regions like Calabarzon and Davao are experiencing more promising price growth, with annual increases ranging from 4% to 7%. These areas offer a better balance of affordability that can be beneficial for property owners in the long run.
Investors may also want to consider horizontal developments, such as single-detached homes, over condominiums. Given the oversupply, condos may take longer to yield returns. For first-time buyers, focusing on long-term value, prime locations, and broader economic trends is most important when deciding where to invest.
Navigating the Market in 2025
The market’s oversupply and shifting buyer preferences have undoubtedly made the landscape more complicated. However, opportunities still exist in suburban areas and high-value horizontal projects. Buyers and investors should carefully evaluate their options, considering market trends, demand shifts, and location before making a decision.
The bottom line is that condominium properties can still be a profitable investment. However, it’s important to carefully evaluate both the property, developer and the current state of the market to make more informed decisions. With the right strategy, you can navigate today’s real estate market and turn challenges into rewarding opportunities.
Kayo, ka-Builders? Gusto niyo bang bumili ng condo ngayong taon?
References
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Business Inquirer. (2024, December 30). PH home prices contract for first time in 3 years. Business Inquirer. Retrieved January 21, 2025, from https://business.inquirer.net/499260/ph-home-prices-contract-for-first-time-in-3-yrs
BusinessWorld Online. (2024, August 6). Residential prices expected to rise 2.2% annually through 2026. BusinessWorld Online. Retrieved January 21, 2025, from https://www.bworldonline.com/property/2024/08/06/612280/residential-prices-expected-to-rise-2-2-annually-through-2026/
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Manahan, J. (n.d.). Realtor: Condo oversupply in NCR due to ‘mismatch’ in inventory, demand. ABS CBN. https://www.bsp.gov.ph/SitePages/MediaAndResearch/MediaDisp.aspx?ItemId=7263
Colliers. (n.d.). 2025 Philippines Real Estate Outlook. Retrieved January 21, 2025, from https://www.colliers.com/download-article?itemId=7f44ff0e-5b64-464e-a92c-a3ab26500c8a
Bangko Sentral ng Pilipinas. (n.d.). Press release: BSP announces the results of the Q4 2024 Consumer Expectations Survey. Retrieved January 21, 2025, from https://www.bsp.gov.ph/SitePages/MediaAndResearch/MediaDisp.aspx?ItemId=7263