The doughnut effect: How COVID-19 has shaped real estate

MORE and more people in some Asian countries are moving out of central regions, opting to live and work in areas with larger spaces and away from the crowds, Malaysian financial giant Maybank said in a recent report.

Residents are moving out of central regions in the Philippines, Singapore, and Thailand causing a “doughnut” effect or hollowing out of the center, Maybank Kim Eng economists Chua Hak Bin, Lee Ju Ye and Linda Liu said in a research note.

“The outmigration reallocated real estate demand – dubbed the doughnut effect – toward the suburbs and away from the city center,” the economists said.

“In the Philippines, property prices outside the National Capital Region that increased by 6.1 percent have been the most resilient in the second half of 2020, while prices in NCR that declined by 8.6 percent fell for two straight quarters,” they said.

Maybank said the global pandemic crisis has led to massive job cuts, forcing millions of migrant workers to return home.

The financial giant added some have voluntarily abandoned their jobs in hard hit COVID countries and relocated.

“These large cross-border migration shifts can have a large bearing on property markets, remittances and population,” the report also said.

The Philippines alone saw 520,000 overseas Filipino workers (OFWs) repatriated back home after being displaced in host countries due to the pandemic.

Furthermore, the country saw an outflow of China workers, who account for the dominant share of foreign workers due to the Philippine Offshore Gaming Operators (POGO) industry.

Data from the Bureau of Immigration showed 293,000 Chinese nationals left the country from January to September last year, while only 189,000 arrived due to the ban on the entry of foreigners into the country since March last year.

As of end September, Maybank believes there are roughly 500,000 Chinese nationals still in the Philippines.

The entry ban on foreigners in the Philippines has weighed on foreign purchases of property.

While there is no official data on foreign purchases, Maybank said data provided by property giant Ayala Land Inc. showed a 60 percent plunge in sales reservations by foreigners, especially from China, which fell 70 percent.

Likewise, foreign share of total purchases fell to 10.9 percent in 2020 from 15.2 percent in 2019, while purchases by local and overseas Filipinos increased. 

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