Strong investor confidence in resilient property sector

It comes as no surprise why real estate continues to enjoy strong investor confidence even amid the pandemic.

After all, Philippine real estate has a solid foundation, having enjoyed a strong, bullish run over the past decade. And as history would show, real estate has managed to bounce back stronger after every crisis.

“Previous crises have shown that prices recover immediately once market sentiment and business activities start to improve. During the Asian financial crisis, prices of condominium dropped between 9 percent and 14 percent from 1998 to 1999, followed by a recovery in 2000 when prices grew by 24 percent. The same trend was observed during the global financial crisis when prices dropped by 1.5 percent in 2009 and immediately recovered in 2010 with a 2.1 percent increase in average prices,” Colliers International Philippines had said.

Safe investment

Last year, global public opinion and data company YouGov even ranked real estate as the third safest investment next to gold and certificates of deposit amid a recession, while in February this year, an article on Forbes.com stated that “real estate has proven to be one of the best investments of all time, with returns comparable to the S&P 500 over the long term.”

In an Aug. 31 article titled, “Why real estate investors are still confident”, real estate services firm JLL meanwhile noted that although economic uncertainty hampers deal-making in global real estate markets, investors remain confident that a recovery in deal volumes in Asia Pacific is only months away. A JLL poll of 38 global investors, representing close to $2 trillion in assets under management, showed that 84 percent of real estate investors expect transaction volumes in Asia Pacific to rebound meaningfully by early 2021.

“Believe it or not, investors aren’t mired in doom and gloom,” said Stuart Crow, CEO, Capital Markets, Asia Pacific, JLL. “There are challenges, but many are looking ahead to refocus their Asia Pacific investment strategies on core geographies and sectors that are benefiting from the acceleration of pre-COVID trends.”

Opportune time

This is perhaps why some investors find today to be the most opportune time to look for lucrative deals in real estate even though it’s highly tempting to simply hold on to their savings and wait until this unprecedented health crisis is over. For this kind of market, it’s a matter of being well informed, striking the right deals, as well as finding the soundest and most suitable investment for them.

It also helps that the Philippines is now seeing low interest rates, which may help keep the pre-selling residential market active despite the economic challenges. Add to that the latest move by the Bangko Sentral ng Pilipinas to ease rules on real estate loan limits of banks. In a release last Aug. 20, the BSP said it raised the real estate loan limit of universal and commercial banks to 25 percent of total loan portfolio from the previous 20 percent.

“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 in Metro Manila, and we expect lease rates to rebound,” Colliers had said.

SMDC’s integrated lifestyle projects continue to attract investors.

Active property seekers

True enough, property seekers had remained active even amid the pandemic, according to Lamudi’s “Outlook on the Residential Market.”

“Lamudi’s initial trend report surveying property seekers, real estate brokers, and property developers, published in May, showed a renewed interest in house and lot properties after the enhanced community quarantine (ECQ) has been implemented. This trend seems to continue on a climb to reach pre-COVID percentages on the platform during the start of the year, as it showed a huge week-on-week increase in inquiries,” the report stated.

“Condominiums had a strong start in 2020, owing in part to the interest in property investment carried over from the previous year… Though condominiums showed a decrease in leads at the start of the ECQ, there was retained interest in the property type. In Lamudi’s previous trend report, it was revealed that 34 percent of surveyed property seekers are considering a property purchase a year or longer into the future, another 34 percent are considering a purchase in six to 12 months, and around 22 percent want to keep their timeframe open,” Lamudi said.

Lamudi’s trend report further showed that in terms of property locations, most of the leads were looking for a property to buy or rent from Quezon City, which comprised 26 percent of the leads in the first half, followed by Makati (12 percent), Pasig (10 percent), and Taguig (9 percent)—all of which are cities with a central business district.

In these cities, one of the property developers that has a strong presence is SM Development Corp. (SMDC), which has remained active and has shown a strong performance amid the pandemic. In fact, it even launched in July the 41-story Gem Residences in Pasig City. This latest offering will afford its future residents an integrated lifestyle, highlighting the priceless benefits of convenience, safety, security and accessibility, which SMDC offers in all of its projects.