Written by: Rita Magallona
More countries are implementing lockdowns in an effort to flatten the curve of the COVID-19 pandemic. President Rodrigo Duterte has followed suit by putting the National Capital Region under Community Quarantine, then the whole island of Luzon under an Enhanced Community Quarantine (ECQ).
Originally scheduled to end on April 12, the ECQ has been extended to April 30 in light of the continuing increase in COVID-19 cases in the country. This ECQ has had a huge impact on the economy, particularly the property sector. Since people are prioritizing food and other essential needs, there has been lower demand for new homes and lower office space take-ups.
What does this imply for investors interested in buying property in the Philippines?
COVID-19 Impact on Philippine Real Estate Market: Declining Property Take-Up
In fact, property consultancy firm Colliers International Philippines projects a decline in the take-up of hotels, offices, and residential property in Metro Manila. Colliers also said that if the situation worsens after June this year, we will see one-fifth of new condominiums ending up empty.
This decline is a stark contrast to the >property boom last year that saw condominium prices increase by an average of 18.9% year-on-year nationwide. Apartments and single houses rising by an average of 10.2% in the last quarter of 2019. This boom came from the increased demand for housing for the large number of mainland Chinese working for Philippine offshore gaming operators (POGOs). These same POGOs required a lot of office space, which was projected at 300,000 square meters.
But because of COVID-19 and the subsequent ECQ, the demand for housing and office space dropped, along with tourist occupancy in hotels which has dropped to 35% from 71% at the end of 2019.
Given these effects, are you optimistic enough about the state of the real estate market in the Philippines to invest?
Can the Philippine Property Market Correct Itself?
To help you balance these projections, experts see a possible shift in the behavior of players in the real estate market. They see outsourcing and traditional companies filling the void left by halted POGO operations, possibly keeping vacancy levels at below 7%.
Colliers also encourage landlords to provide flexible lease terms and wellness certifications of their buildings, emphasizing property management that covers the health and safety. They could do all of this to attract traditional or outsourcing tenants.
But the possible winners in this market are the end-users and investors who want to buy residential property. They could negotiate better pricing in the pre-selling and secondary markets, leveraging the low demand that the current situation brought about.
2020 Property Investment: The Choice Is Yours
As an investor, you know that the market will correct itself eventually and real estate prices will go back up to more reasonable levels eventually.
So, are you willing to take your chances and invest now while the prices are low? How optimistic are you about the real estate market in the Philippines?