Inflation Hedge?

Here's the thought of the day: rental rates in CBDs have remained–in general terms–between Php800 to Php1,000/sqm since 2015.

If you asked experts about the advantages of investing in rental properties, they would say that rental income is a hedge against inflation. However, since I became a broker in 2015, rental rates for prime condos have remained in the Php800 to Php1,000 per square meter range. Units that rent out for Php1,200/sqm are one-offs and are usually located in ultra-prime condos and are interior-designed. Rates went down from Php600 to Php800/sqm when the pandemic hit and with the exodus of ex-pats.

Philippine inflation averaged 3.08% between 2015 and 2022. This means that rental rates (if they were indeed a hedge against inflation) should have increased from Php1,018 to Php1,273/sqm in 2023.

So the question now is, is there an oversupply of condos?