Pandemic tempers hot Philippine property market

MANILA, Philippines — Developers are facing up to 30% drop on sales this year as the pandemic not only weakens demand for property, but also stalls new projects in one of the Philippines’ booming economic sectors.

Prices are bound to correct, although not that much since lockdowns also increased logistics costs for companies now facing difficulty completing condominiums and collecting payments, said Rosie Tsai, president of the Subdivision and Housing Developers Association Inc., a group of 320 property developers including Ayala Land Inc. and SM Development Corp.

“They are requalifying buyers again. Banks have to do it and we fully understand that they are double checking again if those borrowing still have jobs. So we also cannot collect,” Tsai said in a phone interview.

“Sales dropped by 30%. For smaller players, it could be more,” she added.

Low-cost shelters were the biggest victims. With migrant workers coming home in droves and jobless, real estate brokers said a full sales recovery from a “standstill” in March and April is unlikely to happen despite lockdowns getting eased and business restarting. 

A slight price correction looms which can help bring in “real buyers” who have saved up cash, said Emily Duterte, chair at Real Estate Brokers Association Inc., another industry group. “Most are still on a wait-and-see attitude,” she said in a separate phone interview.

While property firms cannot slash prices that much due to expensive raw material costs, Tsai said buyers are now offered “small” discounts or better payment terms such as staggered down payment schemes. To boost sales, Duterte said commissions were initially doubled for agents during lockdown.

Big property firms, Ayala Land and SMDC, declined to comment. But in a July 10 statement, the Ayala property arm said it is optimistic on a pick-up on residential sales.

Price correction

A price drop, even at the slightest, would be a welcome reprieve for the sector where sustained demand from migrant workers, outsourcing employees and Chinese buyers have pushed up prices and fueled concerns of asset price inflation. 

“With the pandemic and the impending drop in demand for condominiums, which will also lack the POGO-push, we may see this trend (in asset prices) reverse in the medium term. Subdued inflation is reflecting of crippled demand,” said Nicholas Antonio Mapa, senior economist at ING Bank in Manila.

The latest first-quarter data, which reflects the first two weeks of the Luzon lockdown, do not yet indicate this. On average, central bank data showed condominium prices rose 23.6% year-on-year as of March, but in urban areas in Metro Manila, prices rose a faster 28%, both of which were a result of “spillover demand” from 2019.

“Based on our survey for the first quarter of 2020, units sold in pre-selling market are down compared to the first quarter of 2019,” said Joey Roi Bondoc, senior research manager at Colliers International, a property consultancy.

Bangko Sentral ng Pilipinas Deputy Governor Francisco Dakila Jr. said liquidity released from recent BSP easing to support the economy is unlikely to fan property prices further. “Banks have remained prudent in their assessment of real estate loans,” he said in a statement.