Property sector’s recovery enablers | Inquirer Business
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Property sector’s recovery enablers

In my previous columns, I mentioned that the COVID-19 pandemic has affected several economic segments including property. But what’s interesting to find out is which economic indicators are likely to signal a rebound in property demand, and which property segments will quickly bounce back in a post-pandemic era.

The Philippine economy contracted by 0.2 percent in the first quarter of the year, ending 84 consecutive quarters of growth, while overseas Filipino workers’ remittances in April dropped 16.1 percent year on year. Unemployment rate also climbed to a record-high in April at 17.7 percent while the Bangko Sentral ng Pilipinas (BSP) reported that foreign direct investments in the first four months dropped 32 percent to $1.98 billion.

But while the BSP is projecting a 0.8 percent contraction in 2020, it expects a sharper rebound in 2021 with a GDP growth rate of 7.8 percent. It’s not all gloom and doom.


Colliers Philippines believes that among the factors that will help prop up demand in the property segment are infrastructure implementation and low interest rates. The national government already mentioned that the construction of key public projects will not be hindered by anti-pandemic efforts. Hence, toll roads, railways and airport projects lined up by the government should be completed as scheduled.


At Colliers, we have released several reports highlighting the positive impact of infrastructure on land and residential prices. Complementing this is the low interest rate environment which should help raise demand for condominiums, house and lots and lot-only projects especially when market sentiment starts to improve.

‘Build, Build, Build’ and Philippine property

The government has committed to the development of major infrastructure projects and we are seeing this all over the country. Infrastructure projects implemented by previous administrations have compelled developers to rethink strategies and pivot based on the direction of these projects.


Colliers believes that the implementation of key infrastructure projects nationwide will provide access to properties that could be redeveloped into mixed commercial, residential and industrial estates. The latter is particularly important as the Department of Trade and Industry announced it will focus on domestic manufacture of essential items such as food and healthcare. The agency is also targeting to lure more manufacturers of electronics with higher design components and features.

In our opinion, locators in industrial parks should look at the incentives that the government may provide and factor these into their expansion plans amid the pandemic. Eventually, these industrial parks should be complemented with socialized and economic housing projects.

Colliers has observed that socialized and economic house and lot projects near industrial parks are recording strong take-up. After being launched 12 months ago, some projects have recorded take-up exceeding 90 percent.

Colliers thus encourages developers with residential projects near industrial areas to launch economic and socialized residential projects with prices ranging from P580,000 to P1.7 million per unit. This is a win-win, especially for developers with both industrial parks and residential projects, as it maximizes the available infrastructure in Southern Luzon.

Project completions

In Metro Manila, we are optimistic that the completion of key infrastructure projects will help prop up the property sector. These include BGC-Ortigas link bridge, MRT-3 rehabilitation, LRT-2 East Extension, NLEx Harbor link, MRT-7, Mega Manila subway, among others.

In Central Luzon, we see the likes of Skyway 3, Clark Airport expansion, Manila-Clark commuter railway and Bulacan Airport raising land values. In South Luzon, we expect Calax, NLEx-SLEx Connector Road, and LRT Cavite extension to further raise property interest.

But progress will not be achieved overnight. The government must ensure that the implementing agencies’ absorptive capacities are expanded and the bureaucracy is streamlined to ensure the success of the government’s massive infrastructure program.

In our opinion, the ushering in of the “golden age of infrastructure” lends support to the government’s decentralization push, which should unlock land values in areas outside of Metro Manila and stimulate business activities in the countryside.

The sustained growth of the property sector post-pandemic will partly hinge on infrastructure implementation and decentralization. Infrastructure projects should support the rebound of the office sector as we see companies looking for alternative locations outside Metro Manila. It’s the improving connectivity that entice outsourcing firms, for instance, to expand footprint in key areas such as Cebu, Bacolod, Iloilo, Davao and Pampanga.

Low interest rates to stoke residential demand

We are now seeing low interest rates and we believe that this is one factor that keeps the pre-selling residential market active despite the economic challenges.

During the Asian financial crisis, interest rates reached 11 to 13 percent with mortgage rates hovering between 14 and 22 percent. But the Philippines’ financial system is now in a better position­—banks are well-capitalized and non-performing loans ratio remains low.

Rates now hover between 5 and 7 percent. That’s why it is no longer surprising to see investors awash with cash looking for properties to invest in while some are scouting for cheaper options outside the capital region.

And low interest rates are important in stoking demand in the residential sector.

Historically, about a year after the Asian and global financial crises, residential rents rebounded. With economic growth and office leasing likely to pick up pace in 2021, this should support demand for condominium units all over Metro Manila, and we expect lease rates to rebound.

The pent-up demand should lead to higher take-up in 2021 once market conditions improve. Previous crises have shown that prices recover immediately once market sentiment and business activities start to improve.

During the AFC, condominium prices dropped between 9 percent and 14 percent from 1998 to 1999, followed by a recovery in 2000 when prices rose by 24 percent. Similarly, prices dropped by 1.5 percent in 2009 during the GFC, and immediately recovered in 2010 with a 2.1 percent increase in average prices.

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Infrastructure implementation and low interest rates are two indicators that will help the property sector, particularly the residential segment, recover once the pandemic wanes.

TAGS: Build Build Build, Philippine property

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