With only one week left of the extended Enhanced Community Quarantine (ECQ) President Rodrigo Duterte imposed on March 16, businesses will be starting to reopen and operate again. Part of the guidelines of the ECQ includes offices and businesses operating differently. Because of COVID-19 and ECQ, all industries are affected, including property.
Prior to the lockdown, the property sector was experiencing a sustained momentum after closing strongly in 2019. Demand for office space was high in and on the outskirts of Metro Manila, thanks to the steady growth of business process outsourcing (BPO) and IT companies. Complementing this demand for office space were residential and commercial developments, as most urbanites prefer living near their places of work and to be near restaurants and malls. The momentum felt by the property sector is also largely thanks to the infrastructure projects all over the country.
But then COVID-19 happened.
The COVID-19 crisis and its impact
COVID-19 paralyzed everything. The National Economic and Development Authority (NEDA) said that the impact of COVID-19 on the 2020 GDP is at 4.3 percent from 6.5 to 7.5 percent, while the Asian Development Bank (ADB) said the Philippine economy could grow by just two percent. Oxford Economics, on the other hand, is projecting a 3.9 percent growth in 2020 from the original 5.9 percent estimation. However, it is expecting a sharper recovery in 2021 with an estimated 7.3 percent growth.
Since many parts of the Philippines are under ECQ until next week, commerce and trade have been restricted since March 15. In real estate, almost all activities are at a standstill. For residential and office spaces, buy-and-sell, leasing, moving in/out are all put on hold due to increasing unemployment or declining remittances from Filipinos abroad. Malls are closed except for supermarkets and pharmacies, with luxury retail and tourism feeling the impact the most due to the ban on flights. Hotels and resorts remain empty except for a few with occupancy at only 35 percent, from 71 percent occupancy at the end of 2019. All this as construction has stopped.
Demand for property will continue
Given that businesses will not go back to the way they were before the pandemic, they will have to reinvent themselves and adapt to the “new normal.” The property sector is a resilient industry as there will always be a demand for housing. Add to this, real estate will still be a preferred investment by many Filipinos. Colliers International Philippines believes that any rebound by the property market is dependent on when normal business activities resume. It adds that should things return to normal by the second half of the year, pent-up demand and a low-interest rate environment will drive the residential market forward.
Consultancy firm Jones Lang LaSalle (JLL) points out that COVID-19’s long-term impact will be minimal, “although investment in real estate has fluctuated over the years through various downturns, the overall trend has been for higher allocations to real estate and we see no reason for this trend to reverse. Real estate continues to offer good relative returns in comparison to other asset classes and we have witnessed increased volatility in the equities and commodities markets,” the report says.
For many weeks now, we kept hearing the term “the new normal” for life after the lockdown, when people are finally allowed to go out of their homes and resume activities prior to the ECQ. The property sector is not excused from adapting to the new normal, as they are also urged to figure out ways on how they will deliver their products and services efficiently and effectively without compromising the health and safety of their employees, the end-users, investors, and the communities.