The Metro Manila residential sector showed early signs of recovery in the first quarter of 2026 as condominium preselling activity sharply rebounded and unsold inventory was absorbed at a faster pace, according to property consultancy Colliers Philippines.

In its latest Metro Manila residential report published on Monday, May 18, Colliers said remaining inventory life (RIL) improved to 6.8 years from a peak of 13.4 years in mid-2025, marking the lowest level recorded in six quarters and signaling improving demand conditions despite persistent risks in the broader property market.

Colliers recorded a 765-percent year-on-year increase in pre-selling net take-up in the first quarter, with demand largely concentrated in economic and affordable condominium projects as developers rolled out aggressive promotions and flexible payment schemes, particularly for ready-for-occupancy (RFO) units.

The consultancy added that net condominium take-up improved to 2,000 units in the January-to-March period from only 200 units in the same quarter last year. Demand was heavily driven by projects priced between ₱1.8 million and ₱3.6 million per unit, a shift from the luxury and lower mid-income segments that dominated demand in late 2025.

Despite the recovery, Colliers warned that the overall market remains fragile due to elevated vacancy levels, inflationary pressures, high interest rates, and geopolitical uncertainty linked to the ongoing Middle East conflict.

Colliers projects residential vacancy in Metro Manila to hit an all-time high of 25.6 percent by the end of 2026 as nearly 13,000 condominium units are expected to be completed this year, almost double the 7,400 units turned over in 2025.

Bay Area is expected to face the most severe oversupply risk, with vacancy projected to nearly reach 60 percent by end-2026 due to the substantial turnover of new supply, including Sy-led SM Development Corp.’s (SMDC) multi-tower Sail Residences project.

Lease rates are also expected to remain largely flat this year as elevated vacancy and substantial new supply continue to weigh on the rental market, while capital value recovery may be pushed beyond 2026 due to inflation, elevated mortgage rates, and geopolitical risks affecting buyer sentiment, the consultancy said.

“The residential market is once again facing headwinds. Following the pandemic, the sector experienced a V-shaped recovery, closely tracking the expansion of the Philippine economy,” Colliers Philippines research director Joey Roi Bondoc said.

“However, a combination of local and global geopolitical tensions has partially eroded immediate post-Covid gains. The conflict in the Middle East and the resulting spike in fuel prices are likely to temper near-term growth, even after developers made significant progress in clearing unsold RFO inventory,” he added.

Despite these challenges, Bondoc said Colliers remains optimistic about opportunities outside Metro Manila and in the economic and affordable housing segments, where underlying demand remains resilient.

Colliers said developers should continue prioritizing economic and affordable housing projects, maximize government-led initiatives such as the Pambansang Pabahay Para sa Pilipino (4PH) program, and diversify marketing efforts for overseas Filipino workers (OFWs) beyond the Middle East to markets such as Hong Kong, Japan, North America, and Singapore.

The consultancy also recommended that developers continue innovating RFO sales strategies, including rent-to-own schemes, extended payment terms, and promotional discounts to accelerate inventory clearance and improve cash flow.