Philippine Real Estate: What’s the pace of recovery after 2020?

Held last April 8, 2020, the Philippine Daily Inquirer conducted a webinar entitled ‘State of Real Estate’ where Prof. Enrique Soriano III, Executive Director, Wong+Bernstein and Joey Roi Bondoc of Colliers International Philippines shared the platform to talk about the impact of the pandemic on the Philippine property market.

One thing is certain to happen, the economy will significantly slow down in 2020. The question now is, after 2020, will it be a V-shaped or a U-shaped recovery?

To help the Filipino people and the economy recover and adapt to a new and better normal, the Philippine government has allocated Php596 billion to help the people cope with the crisis, while some Php59 billion have been provided to the health sector to fight the virus.

To mitigate the impact of COVID-19 during the quarantine period, flexible work arrangements, emergency employment programs, and various forms of subsidies have been implemented.

‘Wait-and-See’ approach

According to Joey Roi Bondoc of Colliers Philippines, the residential demand in Metro Manila is expected to soften in 2020 due to the adverse impact of the COVID-19 pandemic. The market sentiment is seen to improve starting the third quarter coupled with a recovery in demand and supply in 2021, that is if the virus will be contained during the first half of 2020.

‘It’s a moving target, if the crisis ends early, we can probably get past this and recovery is faster, but if crisis extends longer than 4 months, we can probably writing off some assets in the property sector”, according to Prof. Soriano III.

Townships as powerful models

Large-scale, mixed-use and master-planned development bringing together residences, offices, retail and educational institutions popularly known as ‘townships’ are considered as powerful models especially during this lockdown. Everyone is seeing the powerful value of investing in townships because it is self-contained, it’s a mini city where everything is controlled in unison.

“It’s a deal breaker if you don’t invest in a township. Because for obvious reasons, it’s all about convenience and security where everything is in unison.” said Prof. Soriano III.

Megaworld is renowned for being the first in the country to conceptualize the ‘township’ or the ‘live-work-play-learn’ lifestyle concept. In general, townships are considered as the type of development that will thrive after the COVID-19 pandemic where conveniences like offices, shopping malls, fitness centers and medical facilities are all in just one perfect location, according to Prof. Soriano III.

U-shaped or V-shaped recovery?

Under a U-shape, the economic damage lasts for a longer period of time before eventually reaching the baseline level of growth again. The economy bounces back, but the economic damages will last for a while. In V-shape, recovery means that the economy bounces back quickly to its baseline before the crisis, with no major damages along the way. Growth continues at the same rate as before. This is one of the most optimistic recovery patterns because it implies that the setback did not cause any lasting damage to the economy.

As the pandemic halted most economic activities since mid-March, the Philippines is poised for a U-shaped recovery in 2021 according to the Bangko Sentral ng Pilipinas (BSP). “The strong recovery is based on the assumption that the pandemic is contained in the second half of 2020.”, BSP said. This means that the economy could slow down in the first quarter this year and contract in the second and third quarters, before gradually recovering in the fourth.

Growth is expected to bounce back to about 7.7% in 2021 after an estimated 0.2% contraction this year.