Because of the COVID-19 pandemic, aspiring property investors are becoming skeptical about the future of the country’s real estate industry. However, experts argue that now is the right time to invest.
The COVID-19 pandemic caused a stir at the Philippine property boom that started in 2010. We’ve seen rental rates fall and vacancy rates rise this year in magnitudes, and this could be worse than the fallout during the 2009 global financial crisis.
However, the impact is definitely not as adverse as the property market reversal seen when the Asian currency crisis erupted in 1997 as the local business process outsourcing—which has become much bigger to date—would likely lead the way to a rebound by 2021.
“Developers learned during the Asian crisis. They were able to easily get past challenges and come up with timely solutions, including ease in payment schemes for property investors,” according to Allan Ong, Sales Director of LYONS Realty Corp., one of the most reputable brokerage firms in the Philippines.
The challenges brought about by the COVID-19 crisis caused land values in Makati City to decline by 10 percent by the fourth quarter of this year from P858,000 per square meter in the first quarter of 2020. In Bonifacio Global City, land values will fall by 10 percent from P827,700/sqm in the first quarter. In comparison, land values in the Bay Area and Ortigas will decline by 15 percent and 5 percent, respectively, from P390,200/sqm and P354,200/sqm in the first quarter.
This means that the Philippine real estate industry is far from over because the demand is there. In fact, we are currently in the landlord’s market phase for an extended period. LYONS’s Allan Ong said that now is the time to invest in inventory and not sell as land values continue to fall at a fast rate.
“One common misconception of Filipinos in real estate is that investing in properties is expensive. However, the current property values have already caused relaxation in payment schemes. Big property developers are now offering ‘no down payment’ and ‘rent-to-own’ payment options. This is further proof that you can use real estate to increase your net worth.”
Metro Manila Spaces
The available supply and Rental Rates in Metro Manila have gone up with total office supply growing by 900K sqm in 2020. Average Rental Rate has increased by 9% from Php 1,060/sqm to Php1,160/sqm. A total of 900K sqm of new office space available in the market this year. As of March, 350K sqm has been leased out already by different business industries.
While the COVID-19 has slowed down the office market, there will be a demand for office space in the first quarter of 2021 at a minimum of 700,000 sqm across Metro Manila. This means that the demand for office space will be revived towards the latter part of the year once existing and new BPO companies continue their growth all over the country. Allan Ong of LYONS Realty Corp. says there may be a more robust demand from the BPO sector due to global companies’ need to outsource their businesses.
“Investors should take advantage of the country’s ‘demographic sweet spot’ as our working class is mostly composed of millennials, even our OFWs. The Philippine’s real estate industry is gearing towards a progressive business, and residential hub and those who want to invest should start now.”
Recent studies show that the office leasing rate in Metro Manila is seen to decline by an average of 17 percent this year, while the office vacancy rate is becoming even more competitive with a 5.5 percent rise from an average of 4.4 percent last year. The vacancy rate can go even higher to 8.3 percent to 9.4 percent.
Huge property companies have expressed interest in real estate investment trusts (REITs). Property giant Ayala Land Inc. recently filed its application for its own REIT subsidiary, AREIT, while DoubleDragon Properties Corp. is looking at raising P11 billion annually over six years via REITs.
This is a positive outcome for investors as REITs bring about a significant opportunity to relax the Philippine property market, allowing small investors to participate in high-value real estate assets alongside major corporate institutions.
Consequently, Manila’s prime residential market registered one of the highest growth rates globally in 2019, increasing by 6.5 percent, according to Knight Frank’s Prime International Residential Index. Manila is eighth-highest globally and third-highest in Asia.
The growth in Manila’s prime residential market is driven by a tight supply of luxury and high-end properties, an increasing number of Filipino ultra-high net worth individuals, and demand from foreign buyers.
Eight residential projects were launched in the fourth quarter of 2019, including the latest prime properties such as Gardencourt Residences by Ayala Land, Parkford Suites Legazpi by Alveo Land, and The Seasons Residences Natsu Tower, a joint venture of Federal Land and Japanese-based Nomura Real Estate Development and Isetan Mitsukoshi.
This year, Santos Knight Frank reports three projects slated in the first quarter of 2020: The Velaris Residences, a high-end development by Robinsons Land and Hongkong Land; Sonora Garden Residences by Robinsons Land and DMCI Homes; and Avida Towers Parklinks.
Whether you’re looking for a place to dwell for the first time, seeking to move to another one, or planning on having it rented out, potential buyers need to find the right brokerage firm that will guide you on the right property to watch out for before making the purchase. If you’re interested, consider inquiring about other possibilities with LYONS Realty Corp., a trusted brokerage firm in the Philippines dedicated to providing fresh perspective and ideas for a new approach in providing top-notch service to every real estate client. Contact us today and get your dream home in no time.