WILL THE REAL ESTATE MARKET CRASH?

When we consider flippers who bought in 2022-2023, they've listed their properties at “fire sale” levels. They simply want to recoup their investments. I have yet to see listings priced at "distressed" levels.

Will It Get Worse?

It hinges on whether flippers can cover the remaining balance when the properties are turned over. If they can't, asking prices may fall to distressed levels. Flippers face a tough choice:

+ Pay the balance.

+ Forfeit 50% to 100% of the installment paid to developers.

Key Indicator: Watch project turnover dates closely.

The appeal of low monthly payments paired with a large lump sum balance (e.g., 10-10-80 terms) enticed many buyers, even those who likely couldn’t afford the final payment. They banked on flipping the property before turnover. This dynamic is particularly evident in the mid-market segment. Don't take my word for it, search "condo pasalo" in Facebook.

In contrast, secondary market "done" prices have remained relatively flat. Buyers who purchased before the pandemic can still manage to sell at a profit, albeit a modest one.

Illustration:

Buyer 1: Purchased a pre-selling condo in 2018 at 220K/sqm.

Buyer 2: Purchased a unit in the same project’s new tower in 2024 at 320K/sqm (New Developer Price).

Current Market: "Done" prices as of 2024 are at 250K/sqm.

If Buyer 1 sells at 250K/sqm in 2025, they book a profit.

If Buyer 2 sells at the same price, they incur a 20% loss (before taxes and fees).

For Buyer 2, the market feels like it crashed. For Buyer 1, it seems stable.

See the difference? As I mentioned earlier, the confusion arises from the lack of a universally accepted reference point. With equities and fixed income securities, the most recent "done" price/yield is publicly available, making price movements easy to track and understand.

Forecast and Concerns

In my previous article, Connecting the Dots, I predicted "done" prices would remain flat over the next three years. However, recent buzz about a potential condo oversupply circulating on social media could alter this trajectory.

Continued in the next post.