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Condos in Manila
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Why are real estate companies building very expensive condos in Metro Manila which no typical middle-class Filipino can afford?
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The developers built the condos to serve two segments: (1) the foreigners and high-net worth individuals and (2) the growing middle-class (OFW's, BPO Professionals, etc). So, the short answer is, they built the condos NOT EXCLUSIVELY for the middle-class but for the combination of the upper and mid. Believe me when I say the middle-class can afford the PHP 3M condo units. Allow me to expound on my answer. Most of the condominiums in Metro Manila were built because of the (1) surge in foreign direct investments in the country and the (2) rapid growth of the BPO industry. Majority of these events happened in 2012 which co-relates to the start of construction of many of the condominium developments. The developers were anticipating the following: Improved income levels from the BPO professionals (Average Salary for Industry: Business Process Outsourcing)Increased purchases from foreigners (one of these came from the Philippine Retirement Authority's creation of the special retirement visa which would require applicants to purchase condominiums).Special Resident Retiree’s Visa (SRRV): SRRV CLASSIC – for active / healthy principal retirees who would opt to use their Visa deposit of US$10,000.00 or US$20,000.00 (50 years old & above) or US$50,000.00 (35 to 49 years old) to purchase condominium units or use for long term lease of house and lot;Better purchasing power from OFW's. (2012 Overseas Filipinos' (OF) Remittances). Rappler even reported that "The 2012 remittances from OFWs represent about 6.5% of the Philippines' gross national income and 8.5% of gross domestic product" -$23.8-B remittances in 2012 a record highAs a backstory, in 2012, I was managing one of the first international brokerage franchises in the country. We witnessed an all out construction competition. We were one of the first brokerages to get accredited with all the top real estate developers in their international sales department level; Ayala Land Inc, Megaworld Corporation, SMDC, Robinsons Land, Rockwell Land, Vista Land Inc. We also worked with a few up and coming ones such as Hotel 101 and Major Homes Inc. Photo back when I was managing a brokerage franchise. Working with the Presidents, Directors, Managers and Agents of these companies gave me a good insight into their goals and strategies. The common denominator among these developers is their priority in targeting the OFW market, because that's the easiest to tap. They sent hordes of agents in OFW rich US, Middle-East and South-East Asian countries. They still do now, albeit on a much scaled down level. With Injap Sia of Hotel 101 (more known as the founder of Mang Inasal) with Manny Villar, owner of Vista Land Inc. In the year 2012 and 2013, many condominiums got easily sold out in the pre-selling (construction) stage. The one's located in the Central Business Districts like Bonifacio Global City, Ayala Center and Ortigas Center got sold like pancakes. I even had the chance to meet with a group of Japanese investors who bought 1-whole floor (which at that time was not surprising). with Japanese investors (left) & Megaworld team (right) 2016 The developers are now shifting to commercial buildings instead of residential. Note that condos you see that are still being constructed are part of the original planned projects in 2012.
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I agree that many of the middle class cannot easily afford condos in Metro Manila, and I hope that there will be more land and condominiums that will be more affordable. To answer the question: Everything goes back to the basics of supply and demand: how many condos are there vs. how many Filipinos can afford the high price? Even though there are a lot of Filipinos who cannot afford it, there are still some (relatively) rich people and OFWs who can pay for that amount.In the field of Economics, there is another related concept: willingness to pay. Businesses don't need the entire middle class to afford what they are selling — they just need the very few who are willing to pay for that amount. Profit maximization is achieved this way.Foreigners are allowed to buy condo units in the Philippines, and they increase both the demand and the willingness to pay price for a relatively inelastic supply. Condo unit owners can also lease to expats who are temporarily staying in the Philippines (e.g., 1 year).In the field of Marketing, unfortunately, if you cannot afford a product/service, you are not meant to be their target market segment. Harsh, but true.