The Philippine Real Estate Industry has been growing exponentially since 2010, as it follows the country’s strong economic growth. In spite of analysts predicting a shift in momentum in 2019, the real estate industry did not falter. The influx of Chinese companies into the country, namely, Philippine Offshore Gaming Operators, have led to many new offices opening in Manila in the past years.
In addition to this, the steady rise of Chinese investors in the country drives demand for property and are continually pushing prices upwards, not only buying or renting office spaces, but residential properties for their employees as well. As foreign companies continue to target the Philippines’ English-speaking talents, business process outsourcing (BPOs) have contributed massively to the growth of the industry as it is one of the fastest-growing sectors in the country.
Metro Manila CBDs are losing steam while the rest of the country continues to boom, for example, according to Colliers. The average price for a luxury three-bedroom condominium in Makati’s central business district rose by a microscopic 0.87% in 2019 to P232,000 per square meter, an immense decline from a year-on-year rise of 15.55% in 2018, the weakest performance since 2009.
The Philippines experienced a boom in housing prices from 2010-2018, but with a declining domestic economy, the housing market slowed sharply last year. Nonetheless, house price growth continues nationwide. The Nationwide Real Estate Price Index surged 10.4% during Q3 of 2019 according to Bangko Sentral ng Pilipinas (BSP).
Here are some price increases according to property type:
Condominium Units, saw the strongest year-on-year price increase of 29.1% (28.6% inflation-adjusted) in Q3 2019 from a year earlier.
Single Detached/Attached Houses, prices rose by a modest 2.4% (2.1% inflation-adjusted) during the year to Q3 2019.
Duplex Houses, prices surged 24.8% (24.4% inflation-adjusted) year-on-year in Q3 2019.
Townhouses, prices rose by 6% (5.7% inflation-adjusted) over the same period.
Although, with the continued global uncertainties and deepening effects of COVID-19 Pandemic, the housing market is projected to continue its downward trend as potential new homeowners take a more cautious approach to real estate. There are still some who remain optimistic and look for opportunities amid this crisis, despite the fact that several segments such as commercial and hospitality both took a direct hit when the pandemic erupted. They believe that the real estate industry will remain resilient and banks on its stability as an asset class that offers stable returns, passive income, diversification and leverage.
In research conducted by Santos Knight Frank, it was reported that in 2019, Metro Manila’s office sector grew by about 700,000 square meters, while overall vacancy remained below 5%. However, because of work stoppages and disruptions caused by enforcing an enhanced community quarantine to dampen the effects of COVID-19. The original projected growth of 1.18M square meters for 2020, has been reevaluated to 810,000 square meters, while vacancy rate is expected to double, as office expansions are put on hold. The effects predicted by Santos Knight Frank include a drop in real estate activities, immediate pressure on rent for serviced offices and due to travel bans, POGO operations are uncertain but are expected to contract until the end of the year. Meanwhile, some strategies suggested to be taken by companies affected by the crisis are, being flexible for office landlords to secure tenants, retaining international and global tenants should be prioritized as well as for landlords to offer abatements, deferments and consolidation to retain existing tenants.
The trend of the office market will be molded by how governments and financial institutions are able to manage the ongoing crisis. The potential emergence of structural changes, as evident by mass remote working to lower employee density, will also be a factor in how these flexible spaces will be used in the future.
In conclusion, the COVID-19 pandemic has undoubtedly changed the way we live and work, and new trends have started to emerge which make up the ‘new normal’. The ‘new normal’ is still in its evolution, but as aforementioned new trends are already starting to take shape as governments, businesses and communities start adapting to the post-pandemic environment.