Demand for residential units slows as OFWs return home

CEBU, Philippines —  Demand for residential products is seen to slow down as thousands of overseas Filipino workers (OFW) are returning home due to the pandemic.

Market study conducted by Colliers International Philippines indicated that the decline in remittances will have an indelible impact on the residential property sector.

Remittances from the Filipinos working overseas, another major driver of Philippine real estate, is expected to decline by as much as 30 percent this year.

Considering a sizeable chunk of it is used to acquire property and pay rentals, this will affect the real estate industry in the country, particularly the residential segment.

The “disappearance” of POGO workers in the country could also affect the demand not only for office space, but residential rentals and acquisitions as well.

“But as POGO office demand decreases, so are their expected residential take-up,” Colliers said.

The unemployment rate rose to 17.7 percent in April from January’s 5.3 percent and the figure is expected to climb as millions have lost their jobs due to the pandemic. This will significantly curtail people’s ability to invest in residential properties.

In times of a crisis, cash is king, as the old adage goes. Buying houses or condominium units will be among the first decisions to be put on hold in the event of social and economic uncertainties brought about by the pandemic.

Furthermore, the dip in consumer confidence will translate into lower residential demand.

Falling incomes from the returning OFWs and furloughed workers further put pressures on affordability of houses and condos.

Condominium in the metropolis may experience a steeper drop in values compared to houses in the suburbs. Affordable and mid-income segments would likely take the brunt of the price correction as these are the markets that cater to OFWs and the middle-class workers.

Colliers, however clarified that this will just a temporary bump in the demand cycle, and sales of residential units are expected to recovery in short term, as confidence bounces back.