Real estate offers safer investment option, study shows

Amanda Rufino Carpo (center)

As the new coronavirus (COVID-19) pandemic triggers extraordinary volatility in global financial markets, real estate may be a good option for yield-seeking investors looking to hedge against risks, the co-founder of KMC Solutions said.

Amanda Carpo of KMC Solutions, provider of private offices, co-working space and staff leasing, said real estate still had strong potential to give its investors good returns no matter the macroeconomic backdrop.

“Real estate investment is a good idea to diversify your investment portfolio. Equities are much more volatile and carry more risk in general, and real estate can help manage volatility and risk and make your investments more efficient,” Carpo said in a statement.

“More than ever, investors need to understand the effects of volatility. That is what we will be experiencing in the near future,” she said.

A survey by global public opinion and data company, YouGov, recently ranked real estate as the third safest investment next to gold and certificates of deposit. Carpo said such confidence came with good reason. “Property gives owners flexibility on how to earn—it is not just about buying or selling. Investors can remodel or renovate for rentals or for lease among many other options,” she said.

It was noted that real estate was historically a better investment than stocks, based on the research “The Rate of Return on Everything, 1870-2015,” which tracked historical data spanning over a century, residential real estate generally delivered better returns than equity at lower volatility and lower correlation to the performance of stocks in the market.

“These days, it is hard to look at the performance of the stock market and not want to pull your money out. When you pull your money out however, you cement your losses,” said Carpo. “It’s important to stay invested, it’s important to diversify, and real estate can be a good defensive play. There will be economic recovery once society can open up again, and that will happen eventually.”

Carpo sees local real estate turning to be one of the more resilient sectors in the economy despite the COVID-19 health crisis.

On the residential space, sustained real demand for housing from local and foreign workers in the Philippines is seen to keep the market afloat given favorable demographics.

“Condominiums have an advantage over other real estate as developers situate their properties in areas where demand is already strong. This, partnered with the attractive amenities and potential for market appreciation, add to their appeal,” said Carpo.

Further, she said condominium owners could fit their properties to leverage off special industries such as co-living arrangements as well as the strong and steady market for student housing.

“At KMC Solutions we believe there will be sectors of the real estate market that will feel the pain of COVID-19 more than others, such as hotel, hospitality and retail. Industrial, logistics, office and residential will be better off,” Carpo said. “In terms of office space, which is the sector we are in, companies that are now forced to work from home will need to look into distributed workforce and business continuity planning.”

Global companies that are cutting costs will turn to business process outsourcing (BPO) services and automation, which can indicate a good economic turn for the Philippines, she said.

“We believe the Philippines has consistently proven its value over time and more companies will adopt to outsourcing and working with remote teams. We experienced this when we started the company, in the face of the 2008 global recession,” Carpo said.

While the current market situation is causing uncertainty, Carpo said investors must be proactive with their assets. With real estate, this could mean flexibility—adjusting to current demand—while anticipating opportunities for healthier returns as soon as the market bounces back, she stressed.

“KMC has always tried to provide beautiful and healthy workspaces. Companies will be forced to re-think their spaces for safety and sanitation for the safety of their employees, but this will likely be a long-term trend toward spaces that are now more than ever focused on health, well-being and productivity. We could see changes in design as the way we live, work, and interact will be changed by this virus. The underlying value is that health is wealth.” INQ