Property sector must stage a comeback

Industry mavericks have learned their lesson.

They all saw the collapse of the Philippine property sector in 1998 and some setbacks in 2008 during the global financial crisis. At that time, many already concluded that the industry will never be the same—that in whatever way the world emerged in its aftermath, it would be different from prior to the financial crisis. It didn’t happen.

On the contrary, the Philippine real estate industry saw a tremendous exponential growth that stretched for more than a decade. As the momentum gained traction, demand for private capital for property investment and supporting infrastructure increased enormously.

In progressive areas like the National Capital Region, Cebu, Iloilo and Davao, we saw a great migration to these cities where the growing population, reinforced by money sent by overseas Filipino workers and the swelling middle class, exerted pressure and clamored for more urban real estate.

Post-vaccine opportunities

Today, with vaccinations underway, executives are planning and thinking of the critical months ahead amid the continuing COVID-19 pandemic.

Admittedly 2020 was turbulent, mired in uncertainty. The property sector, too, was jolted and yet it managed to start clawing back even in the midst of this health and economic crises. Property players are still upbeat about the economy and stakeholders are already plotting their exit from the pandemic.

No doubt the pandemic unsettled everybody. But if you’re thinking mid to long-term—if you’re thinking two or three years from now—and if you’re already a stakeholder, then ask yourself some fundamental questions: Will housing demand go up in a post-vaccine world? Yes it will. Will friends and families dine out? They will. Will executives return to their offices? Of course! Those offices will probably be reconfigured but definitely we will have our workforce coming back in droves eventually.

Under a post-vaccine environment, cities will continue to grow with technology, demographics and environmental issues becoming powerful value drivers. These are the fundamental economic and social trends that will compel stakeholders to raise the bar—and those things are going to continue post-vaccine.

The changing real estate landscape will have substantial implications. In other words, if you are a residential developer planning a great project or if you had a high-quality asset prior to the crisis, I think there’s a good chance you’re going to have a high-quality asset post-crisis.

Naturally, the volumes may not be as robust as before and that may have some impact on the developer’s bottomline. But time is a great equalizer. In a year or two, we can anticipate the demand returning to pre-COVID-19 levels.

We can also expect 2021 as a year of redemption, offering developers a broader range of opportunities. While there will be more risks, but planners are more cautious now and they will go at great lengths to exhaust and understand home buying behaviors.

Tapping emerging markets

We can also anticipate the formation of emerging markets like the middle class, empty nesters, semi-active, and the ageing population. The expected increase in demand from these markets may help push for specific types of real estate such as service accommodation.

Short-stay rentals can offer a number of benefits that set them apart from other traditional rental investment strategies and the REIT (Real Estate Investment Trust) market will further boost investor confidence. Putting your serviced apartment in the care of a property operator alleviates the risk of long periods of vacancy associated with other rent-to-rent options.

With a completely hands-off experience, leveraging the serviced apartment agreements puts you in a better position to earn a guaranteed premium. With technology enabling your business model, you can expect a lot of disruption on client sourcing all the way to real estate economics. This is just an example of leveraging or repurposing high-quality assets that you currently own. The key is to plan how you can stage a comeback.

As a parting shot, real estate is a business with long development time frames spanning two to three years, so the best time to reimagine was the day before yesterday.