Real estate expert warns: “Stop building condos”

"Stop building condominiums," this is the brave warning made by real estate expert Enrique Soriano III to Cebuano capitalists and boutique developers, as pursuing this kind of venture is too late.

Soriano, who has been doing property market consultancy for 30 years here and abroad worries of the continuous pouring of investments on condominium development in Cebu, saying these kinds of projects are facing "red flags."

According to Soriano, the market for condominium in Cebu is already exhausted, and that boutique developers or those that recently diversified their businesses to building condominiums should reconsider or seriously revisit their plans to avoid losses.

In a press conference Saturday, Soriano, a professor and program director for real estate at the Ateneo Graduate School of Business (AGSB), said the warning signs of condominium oversupply in Cebu is obviously here.

Three years ago, the condominium inventory in Cebu hovered from 7,000 to 8,000. Today the market is flooded with awash inventory and Cebu has breached the 15 thousand to 17 thousand residential condominium up for sale.

There are several signs of an exhausted market, which is on the verge of oversupply danger, this include; when sales velocity are no longer as robust as before; when buyers are mostly coming from outside Cebu, (as far as Mindanao); and when the breadwinner market — OFWs are no longer buying because they already bought one or two units.

These signs are getting clearer everyday in Cebu, and new entrants to property sector or the boutique developers should be wary about this.

Soriano, who have been helping dozens of real estate companies in several crises, including the 1997 Asian economic crunch in the Philippines, and other countries like Singapore, Indonesia, Vietnam, among others, appealed to small and medium developers to pivot or revisit their plans, and diversify to other asset classes, or better yet invest further to hire professionals who professionally monitor and know the market metrics before deciding where to put their money.

The real estate expert directed his warning to capitalists whose core businesses are not into real estate but were just carried away by the current. "They should have done their homework, not out of sheer excitement."

He said it particularly alarms him to see Cebuano capitalists whose business expertise is not into property development announcing their plans to enter into condominium development this late. In fact, Soriano said he already sensed the signs of slowdown three years ago.

Condominium projects or giant developers, or those that have been in the industry for long and already built their brands won’t be affected by the looming crash, he clarified as these companies can easily divert their investments to other asset classes, like targeting the premium class market, or better yet pivot their projects to horizontal developments.

Horizontal developments, he further clarified is still lucrative in Cebu. Housing units offered between P500 thousand to P3 million are still hot. But, condominiums on the other hand have already reached its peak, and now it’s on its way down.

Soriano is also the current executive director and corporate turn-around advisor of theASEAN based Wong+Bernstein Group, an Asia Pacific based Advisory firms whose clients range from Asia's Top 500 corporations to the country's SMEs.