COVID-19 has upended economies, businesses and personal finances around the world, but opportunities remain in a few sectors. Real estate heads point out that ‘those who choose to take an early position will have a better investment portfolio.’
One of the lessons the 2007-2008 global financial crisis taught investors is that those who panic-sold were unable to reap the rewards of the subsequent economic recovery. Brought about by excessive risk taking and the greed of banks, the economic crisis was seen as the worst since the Great Depression of the 1930s.
Until COVID-19 spread across the world at the beginning of 2020.
The 2019 corovirus has upended economies, businesses and personal finances around the world. We are all in a nightmare that experts predict will continue for years to come. It doesn’t help that our government’s lack of a coordinated nationwide response has been fruitless. Still, opportunities remain in a few sectors — real estate being one of them — for those looking to strengthen or diversify their investment portfolios.
Property consultants Colliers projects land values in Makati CBD and Fort Bonifacio to drop by 10 percent or P773,000 sqm. and P745,000 sqm. respectively by the fourth quarter of the year.
On the commercial side, the two-month lockdown and lack of public transportation have led offices to rethink their work setups and continue WFH at some level, which means a slowdown in leasing activities that may extend to 2021 or 2022. And while malls are now open at limited capacity, people’s fears about their own safety are still keeping many consumers away.
Jan Custodio, senior director for research and consultancy of Santos Knight Frank, says, “A number of property owners that we have spoken to are not in a rush to sell and some are even looking to make a purchase. This is a sign that a number of owners have maintained a strong cash position, most likely learning the lessons from the 1997 Asian financial crisis and the 2007 global financial crisis. Looking for discounts will also be a challenge as distressed sellers will be hard to find and they will still try to hold out for the best price possible. If you were to find one, it’s best to keep close tabs on them because the longer they hold out, the higher the chances that they would sell and the better the position for the buyer to ask for a discount.”
We asked heads of the top real estate companies two questions: Is 2020 the right time for buyers to invest in property, or should they wait until next year or possibly longer? And for the big picture, how will property investment help the economy?
Thomas F. Mirasol, president and COO, Federal Land
The strength of real estate as an investment has always been its stability — property values are not as volatile as stocks and are a more reliable store of value than the so-called “investments of passion,” such as collectibles, jewelry and the like. From what we’ve learned during the quarantine, we have already begun to see early signs of a shift in consumer preferences when it comes to property. Consumers are looking for bigger open spaces, self-contained community integration, and reliable property management. When that becomes more mainstream — and we think it will — those who choose to take an early position will have a better investment portfolio.
When it comes to economic impact, real estate is one of the most resilient industries. We know that demand will eventually surge. Investors who have the means will use the opportunity to get ahead of the game before that happens and invest at a relatively lower market price. Should an investor decide to delve into the residential rental market, they should enjoy better yields. On the other hand, investors who are buying for their own use are in an even better position — the longer they hold on to it, the more capital appreciation they should enjoy.
In the bigger scheme of things, investments in real estate create a ripple effect on economic growth and vice versa. At its core, an active real estate industry generates taxes for the government and jobs for the community. Plus, with the shift to township and integrated developments, real estate projects stimulate sustainable public consumption — creating venues for the public to purchase goods and services that would otherwise be absent if not for the development of idle land. All of these contribute greatly to the national GDP.
Real estate is also one of the industries that the government is looking at to help jumpstart the economy after this pandemic is over. There are certain fiscal policy measures being developed to support investments in residential property in strategic growth centers around the country. This, together with the administration’s continued focus on developing crucial infrastructure, point to a more robust real estate industry especially for properties near mass transport systems, toll roads, airports, and tourist destinations.
Leonardo T. Po, executive vice president and treasurer, Arthaland
History has taught us that the property market is cyclical, and that opportunities exist during both good and bad times. Our present situation has highlighted the need for more efficient, safer and more resilient real estate developments. The ability to discern the right type of property for investment is quite important, given the new normal. Some of the things to consider are the project’s location, its quality, the expertise of the property management company, and the reputation of the developer. The pandemic has made people more health conscious, more focused on spending money wisely, and more attuned to the environment. Therefore, both end-users and investors will now be looking for properties with more health, green and business continuity features. Sustainable and wellness-certified properties offer a lot of benefits, such as lower density to reduce the risk of disease transmission, reduced electricity, water and resource consumption for lower operating costs, improved indoor air quality, more access to daylight and green spaces for healthier surroundings and increased productivity. These benefits can generate higher customer demand, which will result in a good long-term investment.
A vibrant real estate sector is a key pillar of any economy. The resumption of real estate industry operations will have an immediate positive impact, as it is one of the major contributors to the country’s Gross Domestic Product (GDP), and its overall business ecosystem. It will have a big impact on job creation and the reduction of unemployment since construction is labor-intensive, and would help provide employment opportunities to many displaced workers. The real estate industry has a long supply chain and it links with other large capital-intensive industries such as steel, cement, tiles, glass, paint, fittings materials, equipment, and technology. It will create a catalyst for restoring growth in the Philippine economy.
However, the industry will have to adapt to the new normal of working in a post-COVID environment. The correct safety protocols and procedures must be in place to ensure that construction sites are COVID-free to prevent the further spread of the pandemic. Real estate developers must likewise adapt the proper policies to ensure that the companies, and that their customers and stakeholders are safe.
The Philippines’ strong macroeconomic fundamentals will provide forward momentum and a quicker recovery after the pandemic has subsided. Our country’s young working population, dynamic consumer-based economy, strong banking sector, growth in national infrastructure and stable fiscal management are expected to drive the demand for commercial, industrial, logistics, and residential sectors of the real estate industry.
Nova J. Noval, COO, Be Residences
Absolutely, 2020 the right time for individuals to invest in property. It might seem odd to think of property investment or any investment in this global health crisis, but real estate will always be a sure thing. And indications show that among the industries first to bounce back is the property sector. Developers have been scrambling for market share with outright discounts, low reservation fees, extended downpayment terms and attractive promos. For those with disposable income, now is the best time to capitalize on the opportunity.
Also, the fear of the unknown has sparked a renewed desire to be in a comfortable and safe home, which we project will extend over a period of time. Residential condos and homes will be designed with these factors in mind. The crisis buyer is not only careful where he parks his cash but also puts a premium on quality and assurance.
After a number of areas were placed under GCQ, the market interest has substantially picked up. And once confidence is restored, property prices will most likely go up. If you wait till next year, property prices will have increased by as much as six percent, and the payment terms won’t be as favorable.
The property sector has been on an upswing for 10 years now. So instead of a possible overheating, this two-month pause prepares us for a softening of the market. The good thing though about Philippine property is that there is a real demand with the over six million units housing backlog. Hence the forecast year-over-year (YOY) is still a positive growth rate.
Construction for most pre-selling properties has been delayed even prior to ECQ — and the quarantine restrictions further extends this delay. Increased confidence among property buyers will in turn boost developer confidence to hasten and catch up with construction timelines. This entails more workers needed on construction sites and an increased demand for construction materials. Construction is also among the priority measures of the government to kickstart our economy.
A boost in demand, supported by low-interest rates, will gain buyers’ confidence to invest in property with the help of bank financing.
Cris Zuluaga, AVP, head of Project Development and Commercial Lot Sales, Ayala Land Estates Inc.
Real estate has always proven to be resilient even during difficult times. The property market will bounce back from this crisis stronger and it will be good for people to sustain their interest in real estate investments. Ayala Land has seen this work for many of its buyers in the past who invested during a downturn, and given our strong track record, they are now reaping the benefits of growth and higher land values. Now is an excellent time for those who have the available funds to look into opportunities in the property sector as these could prove to be worthwhile investments later on.
Joanna Marie Soberano-Bergundthal, VP, marketing and HR director, Cebu Landmasters
For those with disposable income, whether looking to purchase property for investment or looking to buy their first home, now is a good time and there is no need to delay due to the crisis. Property payment terms are made more accessible today, allowing more people to purchase their own home.
The importance of having a secure and stable home is heightened significantly because of the pandemic, and some developers have adjusted their terms to respond to this need. Also, real estate is a smart and reliable investment — prices will always continue to appreciate and this will give better returns than keeping savings in the bank. Property seekers now will just have to choose well and be extra selective. Find a property that has the right basics in place — good location, good quality, value for money and reliability of the developer to deliver.
The real estate sector is definitely a key contributor to the Philippine economy. Investing in property today will keep the industry alive and flourishing — that’s jobs to construction workers, and the whole real estate workforce. We hope we can continuously support the property sector, especially to further fill housing backlogs in our country for families in need of safe, affordable, quality homes.
In Cebu Landmasters, we have not adjusted our property prices as we have set our pricing competitively and reasonably from the start. However, we are being flexible with our payment terms, stretching the equity period to make it lighter to the pockets of our homebuyers. We understand how essential it is for everybody to invest in having their own home — especially today — and people are realizing this while we have been confined in our homes for the past months. Hence, we adjusted our terms, customizing them per project based on the capacity to pay of our target buyers, while digitalizing our transactions. As a result, we are glad that inquires and sales have been good so far. The market has responded positively and we aim to continue to do what we can to support the home buying goals of our VISMIN buyers throughout this pandemic period and after.
Noli D. Hernandez, executive vice president for sales and marketing, Megaworld
Among the important lessons we can learn from this pandemic is the importance of choosing where to live. When Singapore eased up on their quarantine, people’s need to take their vaunted mass public transport spiked up their number of cases. Megaworld’s pioneering live-work-play townships offer a safer and more convenient alternative as it limits, if not totally eliminates, not just the normal hassle of commuting, but the added hazards associated with it.
Despite the understandable gloom pervading the markets — and actually because of it — 2020 is the best time to consider investing in real estate not only because of what we’ve learned during this pandemic but mostly because it remains to be the most solid and reliable store of value in these most trying and uncertain times.
At the same time, any investments made in real estate goes a long way in helping the economy get back on its feet. The multiplier effect of any such investments still guarantees the highest among any other industries, creating jobs and stimulating a myriad economic activities downstream. In short, any real estate investments made, especially at this time, is an investment in our collective futures.
Henry L. Yap, SVP and business unit general manager, Robinsons Land Residential Division
In the Philippines, real estate prices do not go down as much as other countries in a market downturn. Moreover, property prices are not as volatile as stocks, bonds and other financial instruments. As such, those in the know, as well as those with the foresight, would take this opportunity to invest in real estate.
Seasoned investors realize that they have more buying power because they can scout for better deals, and utilize lower cost funds to buy and hold on to real estate. In the meantime, their strategy allows them to generate rentals/returns in the interim, while providing a source for capital growth and value appreciation once the economy improves.
Investment in real estate is also considered a hedge against inflation. The long-term potential of a higher resale price makes it a valuable asset to acquire in times of crisis. Property investment has always played a big part in any growing economy and vice versa. Increasing personal consumption and expenditure result in entrepreneurs’ demand for more commercial shops and businesses, expansion of manufacturing plants and logistic sites, and demand for more business spaces. Improved income pushes individuals and families to seek better quality of life through upgraded housing, wider availability of amenities, and demand of better community facilities, services, and improved environment.