Real Estate Resilience in The New Normal
Investor’s appetite for the real estate market has been increasing despite the current global crisis and recession in the local economy. This is mainly due to the significant drop in property prices caused by the pandemic.
Before the ECQ last March, the Philippines was at the peak of property prices with land values reaching as high as Php 600,000 to Php 1,000,000 per square meter in central business districts in Makati and BGC.
Since 2010, the prices of prime real estate in the Philippines have been increasing and continuing to grow in demand. In this new normal amidst facing global economic lows, investors are given the chance to buy prime real estate at a price below market value for the first time in more than 10 years.
With the current global recession and lows in the economy, the local property scene has shifted to a Buyer’s Market.
In this market condition, there are more Sellers than Buyers. Property owners who have been negatively affected by the pandemic due to a decrease in income or medical concerns are more likely inclined to sell their assets to help adjust to this new normal. Selling prices may vary given the situation but in cases where the Seller immediately needs funds or liquidity, the trend is to sell the property below market value.
On the other hand, there are fewer cash-ready Buyers since the vast majority are negatively affected by the pandemic especially in the lower to middle-class which comprise the majority of the population.
This trend led to property prices declining up to 20% across different sectors giving opportunities for stable long-term investors for land banking.
More opportunities await for long-term investors. Buying a property at 10-20% discount translates to millions in savings.
For example, a high-end Two-Bedroom condominium by Shang Properties (an internationally renowned developer) worth Php 20,000,000 back in 2019 or prior pandemic, is now being offered at a 17.5% discount, resulting in roughly Php 3,500,000 in savings. For more information, see Shang Rise investment plan.
With the current downtrend in the overall prices, Property Developers are now challenged to offer special payment terms that are more advantageous to Buyers. Such special terms include lower downpayment and amortization plans to make the property more affordable for the Buyers.
Outright discounts for ready-for-occupancy properties and low-payment terms for the pre-selling properties have been the industry’s reaction to this new normal. Looking on the bright side, the on-going global economic lows gave us an opportunity to buy real estate at favorable prices and terms.
The pre-selling market has always been a good source of strong capital appreciation with a variety of options from different developers, price-points, and locations.
Opportunities for appreciation and affordability in the pre-selling market include The Lattice in Parklinks by Alveo Land, a 35-hectare mixed-used urban estate, which was launched in 2019. In this new normal, special terms such as “No Down Payment” plan are available for their premium units.
Prior to the new normal, for a One Bedroom Unit (58 sqm), an upfront downpayment of Php 2,600,000 is required. Today, for only Php 74,000 a month with no required downpayment, a Buyer can already own a brand new Ayala condominium. For a complete breakdown, see “No Down Payment“.
In pre-selling real estate, “No downpayment terms” and low amortization terms also mean lower overall cash-out which can be beneficial for investors who plan to sell the property in the future due to the lower equity paid for the same upside.
Another opportunity for a lower cash-out in the pre-selling market is in Ortigas East. Formerly known as Tiendesitas or Frontera Verde, the 16-hectare redevelopment plan includes the addition of a new mall, park, and hotel together with the residential and office towers currently being offered to the market.
The Maple at Verdant Towers in Ortigas East can also be an avenue for investors. Special promo terms consist of 15% cash-out over a period of 46 months and 85% upon completion date. Around Php 80,000 a month amortization for a prime Two Bedroom unit (89 sqm).
Owning your dream condominium unit with a stunning golf course view is now made easier by Shang Wack Wack’s special promo terms. For a deluxe One Bedroom (81 sqm), monthly amortization is down to Php 43,000 a month which was previously at Php 151,000 prior pandemic, more than triple the amount of the amortization today.
Rockwell Land, also known for its high-end developments, are also offering special promo terms for their flagship project, The Proscenium Residences by Rockwell. For a Two Bedroom (89 sqm), the amortization cash-out is down to Php 230,000 a month today compared to Php 950,000 a month prior to the pandemic.
Despite the pandemic, opportunities in real estate can be a bright spot for land banking and real estate investors.
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