The subject of the “asset bubble waiting to explode” in the Philippine residential condominium market remains contentious among industry stakeholders. While developers and brokers agree that the market remains healthy, there are many others who remain sceptical about the true health of the residential property market.

The argument for those who believe that the residential sector is heading for a crash is mainly founded on the volume of new supply that is expected to complete in the market over the next couple of years. For the past five years in Metro Manila alone, the average number of residential condominium units completed in a quarter was approximately 6,000 units, while there are over 8,000 units that are expected to be ready per quarter over the next five years. This quarterly supply of new residential condominium units far exceeds the ten-year (2003-13) historical average of 600 units per quarter. To the naysayers, the future stream of completions is a product of the excessively hyped demand over the past few years.

Evolving Metro Manila landscape with increasing number of residential condominium developments

For those who believe that demand for residential condominiums remains healthy, their argument is anchored on the condition of the demand drivers – the improving spending power of urbanites, fuelled by remittances from overseas Filipinos (OFs) and the proliferation of the offshoring & outsourcing (O&O) industry employing a growing number of professional and skilled workers.

In the 2Q14 Consumer Expectations Survey conducted by the Bangko Sentral ng Pilipinas, the allocation of OF remittances for the purchase of residential developments remained strong. The consumer outlook has also improved because household income has risen on the back of higher salaries and an increase in the number of employed persons within each household.

Moreover, in the first half of 2014, OF remittances grew by 6.2% y-o-y to USD 12.7 billion. Revenue from the O&O industry is expected to grow to USD18.0 billion with more than a million full-time employees (FTEs) by end-2104 from the USD15.5 billion and approximately 900,00 FTEs in 2013.

With OF remittances and the O&O industry on an upward trajectory, demand for residential developments, particularly in the residential condominium sector, is expected to grow. As the demand for skilled Filipino labour, both within and outside the Philippines, consistently increases, we can expect the need for housing and accommodation, particularly those upgrading in the major urban cities, to remain strong.

Nonetheless, it is no surprise to expect also a growing buzz among those who are waiting for a crisis to unfold.

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