Why Some Owners Never Update Their Pricing Even When Costs Rise

Condominium prices in Metro Manila fell 9.4 percent year-on-year in the most recent data — a sharp reversal from the 8.3 percent increase recorded the year before. That drop happened while construction costs, land prices, and financing expenses stayed elevated. Developers, facing a widening gap between what it costs to build and what buyers will pay, are effectively stuck. They cannot raise prices without losing buyers, and they cannot afford to keep them low. This is the core puzzle that explains why many owners, not just in real estate but across industries, never update their pricing even when their own costs keep climbing.

Three Forces That Freeze Prices

Pricing inertia — the decision to keep prices unchanged despite rising input costs — rarely comes from a single cause. The research points to three distinct but overlapping drivers that explain why owners hold the line even when their margins are shrinking.

How the Situation Differs by Segment and Location

The pricing freeze is not uniform. It plays out differently depending on the market segment, the geographic location, and the size of the business.

Metro Manila vs. Provincial Markets

In Metro Manila, the mid-end residential segment is where the supply-demand mismatch is most acute. Developers built heavily before the pandemic, and the shift in buyer preference toward larger units left many studio and small one-bedroom units sitting unsold. Outside Metro Manila, unsold inventory sits at about 5 percent across roughly 250,000 completed units — a thinner overhang, but still significant. The dominant provincial markets are Metro Cebu (54 percent of stock), the Cavite-Laguna-Batangas corridor (24 percent), Metro Davao (13 percent), and Metro Iloilo (3 percent). Owners in these regions face different demand dynamics, but the same underlying cost pressure.

Large Developers vs. Small Owners

Large developers with multiple projects can cross-subsidize — one profitable project offsets another that cannot raise prices. Small owners, particularly those with a single property or a small business, have no such buffer. Inflation creates uncertainty that makes long-term financial planning, market forecasting, and investment decisions increasingly complex. For SMEs, the margin squeeze is more direct and more dangerous.

Segment-Specific Dynamics

The mid-end market faces the worst of the pricing dilemma. Buyers in this segment are more price-sensitive, and the survey data shows that only 26 percent of Filipinos feel they are “doing alright” while 20 percent find living difficult and 9 percent find it very difficult. Raising prices in this segment means losing buyers who are already stretched. At the high end, demand is more insulated from price changes, but that market is thinner and takes longer to transact.

The Hidden Costs of Keeping Prices Low

Not updating pricing carries its own risks, and they are easier to ignore because they accumulate slowly. The most obvious is profit margin erosion. When input costs rise — raw materials, energy, labor, transportation — and the selling price stays flat, the gap comes out of profit. Over time, this erodes the buffer a business needs for maintenance, upgrades, or unexpected expenses.

But there is a less obvious cost: the signal that a stagnant price sends to the market. If a condo unit or a product has been listed at the same price for years while everything around it has gone up, buyers may interpret that as a sign of low quality, desperation, or hidden defects. In the real estate context, the report notes that investors and tenants prioritize properties in prime locations with superior amenities and robust infrastructure. A price that never moves can suggest none of those things are present.

On the other side, raising prices when the broader public already believes that businesses are making excessive profits — 77 percent of Filipinos hold that view — risks brand damage and customer loss. The survey found that 64 percent of Filipinos attribute rising costs to workers demanding pay increases, and 59 percent blame immigration. The public attributes inflation to multiple causes, but businesses are the most frequently blamed single factor. Any price increase, no matter how justified by cost data, will be read through that lens.

What Owners Can Actually Do

The research points to several strategies that owners use to manage this tension, though none is a perfect fix. The most common approach is to improve operational efficiency first, then adjust pricing only when costs cannot be absorbed any further. The ithy.com analysis outlines adaptation strategies that include adoption of technology, automation, and digital tools for real-time cost insights, as well as diversification of supplier bases to reduce exposure to price shocks from any single source.

Another approach is to shift the bundle rather than the price — adding amenities, improving finishes, or offering flexible payment terms so that the same nominal price feels like more value. In the condo market, this shows up as developers reconfiguring unit layouts to match the shift toward larger spaces, or adding shared amenities that justify the price point without a direct increase.

Dynamic pricing models — where prices adjust based on demand and cost variations — are another option, though they work better in retail and services than in real estate, where prices are sticky and transactions are infrequent. For owners who cannot or will not adjust price, the alternative is to hold inventory and wait for market conditions to shift. That works only if the owner has the financial buffer to carry unsold units or slow-moving products without distress.

Frequently Asked Questions

What to Watch For Next

Whether pricing inertia is a smart strategy or a slow bleed depends on how long the owner can afford to wait. The key indicators to track are unsold inventory levels in your specific market, the direction of input costs (especially energy and raw materials), and consumer sentiment data — particularly the share of people who say they are living comfortably or finding it difficult. If unsold inventory is growing in your segment and costs are still rising, holding the price becomes harder to justify. If inventory is tightening and cost pressures ease, the wait may pay off. The worst position is to be caught in the middle — unable to raise prices because of weak demand, but unable to absorb costs because margins are already gone.

If this was useful, you might also want to read how high costs make Filipino exports less competitive.

Sources

Expensive retail distribution slows Philippine growth — Explains how distribution costs compound pricing pressure across industries.

Filipino businesses struggle with poor trade ties — Covers the supply-chain side of the cost problem.

Developers struggle to adjust condo prices as costs remain high. BWorld Online / Cushman & Wakefield, 2025.

Inflation Business Effects. ithy.com, 2025.

Filipinos blame business profits, interest rates for rising costs — survey. PhilStar / Ipsos, 2025.