This photo shows condominium units in Bonifacio Global City. Condominiums are seen to have the edge over other real estate projects because they are situated in areas where demand will be strong.
SOME industries may be resilient enough to weather the uncertainty despite the adverse effects of the coronavirus disease 2019 (Covid-19) pandemic on economies worldwide. According to KMC Solutions, no matter the economic environment, real estate still has strong potential to give its investors good returns.
“Real estate investment is a good idea to diversify your investment portfolio. Equities are much more volatile and carry more risk in general, and real estate can help manage volatility and risk and make your investments more efficient,” said Amanda Carpo, co-founder and chief legal counsel of KMC Solutions Inc. “More than ever, investors need to understand the effects of volatility. That is what we will be experiencing in the near future.”
Good performance historically
According to a survey by global public opinion and data company YouGov, real estate was ranked the third safest investment next to gold and certificates of deposit. Carpo said this confidence comes with good reason. “Property gives owners flexibility on how to earn—it is not just about buying or selling. Investors can remodel or renovate for rentals or for lease among many other options,” she said.
Apart from this, real estate is historically a better investment than stocks, according to the study titled “The Rate of Return on Everything, 1870-2015.” Observing more than a century of returns from securities like equities and housing across different countries, the research finds that in the long run, residential real estate generally delivers better returns than equity at lower volatility and lower correlation to the performance of stocks in the market.
Carpo said that it is important to stay invested and to diversify. She points out that real estate can be a good defensive play, saying there will be economic recovery once society can open up again. And that will happen eventually.
The ‘new normal’ for real estate
Locally, real estate is seen to be one of the more resilient sectors in the economy despite the coronavirus disease 2019 (Covid-19) health crisis.
On the residential front, sustained real demand for housing from local and foreign workers in the Philippines is one of the sector’s key drivers and is expected to help keep the market afloat as the virus is dealt with. The young millennial market also leads property seekers, with rentals continuing to be attractive options for housing as these are the most sought-after properties, according to a Lamudi study.
“Condominiums have an advantage over other real estate as developers situate their properties in areas where the projected demand is already strong. This, partnered with the attractive amenities and potential for market appreciation, add to their appeal,” according to Carpo. Furthermore, condominium owners can fit their properties to leverage off special industries such as co-living arrangements as well as the strong and steady market for student housing.
On the other hand, commercial spaces have a segmented outlook.
“At KMC Solutions, we believe that there will be sectors of the real estate market that will feel the pain of Covid-19 more than others such as hotel, hospitality and retail. Industrial, logistics, office, and residential will be better off,” Carpo explained.
She added that in terms of office space, companies that are now forced to work from home will need to look into distributed workforces and business continuity planning.
It is also foreseen that companies cutting costs will turn to business process outsourcing services and automation, which can indicate a good economic turn for the Philippines.
“We believe the Philippines has consistently proven its value over time and more companies will adopt to outsourcing and working with remote teams. We experienced this when we started the company, in the face of the 2008 global recession,” Carpo said.
At the end of the day, it all boils down to opportunity.
“While the current market situation is causing uncertainty, investors must be proactive with their assets. With real estate this could mean flexibility—adjusting to current demand while anticipating opportunities for healthier returns as soon as the market bounces back,” said Carpo.
“KMC has always tried to provide beautiful and healthy workspaces. Companies will be forced to re-think their spaces for safety and sanitation for the safety of their employees, but this will likely be a long-term trend toward spaces that are now more than ever focused on health, well being and productivity. We could see changes in design as the way we live, work and interact will be changed by this virus. The underlying value is that health is wealth,” she added.
Real Estate Investor and Co-host of the BiggerPockets Podcast!
6 min read
Opinions expressed by Entrepreneur contributors are their own.
You work hard for your money, but does your money work hard for you? When you store your cash under your mattress (or in a bank if you aren’t a weirdo), it will produce next to nothing. However, when you put money into an investment, your dollars go to work for you.
Plain and simple: Investing is how you become wealthy.
But what is the best “job” for your dollars? How can your money earn the most and offer the least risk? In my opinion, one investment stands head and shoulders above the rest: real estate.
Yes, real estate is subject to timing; and there are times when real estate is not the wisest investment. However, I believe that right now might be the greatest time to buy real estate that we’ll see for another decade or longer. Here are seven reasons why.
1. Interest rates are incredibly low.
Although the “Brexit” scandle that just rocked the world and caused financial markets to tumble, there is one segment of investors who will benefit from the news: those with money tied up in real estate. Why? Two words: Interest rates. Low interest rates lead to low monthly payments, which is great for real estate investors looking to maximize their profits.
Interest rates, which have been at historically low levels for the past decade, have been slowly climbing over the past year, and until recently, most analysts believed that a series of rate hikes from the U.S. Federal Reserve was coming soon. But, with the shaky markets, the opposite has happened: Interest rates have dropped. According to a recent article, “The probability of a federal funds rate hike at the Fed’s next three monthly meetings has collapsed to 0 percent, and traders are assigning a less than 8 percent chance of a rate increase at all this year.”
Several years from now, we’ll look back and say, “Remember back in 2016 when you could get a mortgage under 4 percent? Those were the days!”
2. Banks are lending once again.
In the collapse of the real estate market in 2007 and 2008, many banks tightened their lending standards to such a degree that obtaining a mortgage became next to impossible for many Americans. However, gradually over the past several years, banks have once again begun opening their vaults and relaxing their standards.
No, this doesn’t mean you’ll be able to obtain a 125 percent loan-to-value mortgage with no money down based only on “your signature,” as you may have done during the mid-2000s, but if you have a job and decent credit, obtaining a fixed-rate loan shouldn’t be impossible.
3. Prices are reasonable.
Yes, real estate prices have climbed significanlty from their 2011 and 2012 lows. However, for those willing to hustle to find great deals, great deals can be found. This is especially true for investors who buy bank foreclosures. According to RealtyTrac, there were over 100,000 foreclosure filings in May of 2016, showing only a mild decrease over the past year.
4. Technology has made investing significantly easier.
In the “olden days,” investing in real estate took a significant amount of driving around, talking to people, waiting, looking at hundreds of pages of documents and other difficult, time-consuming tasks. Today, technology has made investing in real estate significantly easier. For example:
Advertising units is as simple as posting to Craigslist.
Screening tenants can be done online through a number of screening services.
Handyman and cleaning services can be ordered online.
Tenants can pay rent online rather than in person.
Your agent can set you up with automated email alerts for new listings.
You can invest in real estate passively through crowdfunding websites.
And so much more. Today, a real estate investor barely needs to leave the comfort of home to manage a portfolio of rental properties, thanks to technology.
5. Knowledge is free.
In the past, real estate knowledge was primarily taught by “get-rich-quick” gurus who traveled the country charging outrageous fees (up to $100,000) for “secret knowledge.” While this practice is still common, the internet has democratized learning in a way that makes real estate investing education completely free.
There are thousands of blog posts, ebooks, podcasts, forums and more sources that help real estate investors connect. BiggerPockets.com, where I spend my nine-to-five, is a good example. Millions of new and experienced investors come to our platform monthly to learn and grow as investors — for free.
6. Your job is unstable.
While you might think you have a stable job, job security is not what it once was. Employers are all too happy to let go of hundreds or thousands of employees just so the price-per-share might increase a few percentage points. Efficiency is the name of the game, and your job might be on the chopping block.
Today, the best job security is enjoyed by those who take an active interest in gaining skills and knowledge that can be used elsewhere. Real estate investing is one of the greatest ways to gain financial independence so your job can become optional rather than required.
7. Ten years from now you’ll wish you had started today
Finally, let’s talk about the big one: Investing takes time. I’m not promising you that tomorrow you’ll be rich if you start investing in real estate today. But I am telling you that in ten years you will likely look back at 2016 and say, “Why didn’t I start back then?”
As previously noted, we are now at a unique point in history where real estate investing just makes sense. Wait too long and you’ll miss out.
Of course, I’m not telling you that any piece of real estate is going to make sense. You still need to understand what you are doing. You still need to do the math correctly. You still need to hustle to find the 1-in-100 deals that actually makes sense.
But for those willing to do the work? The timing couldn’t be better.
COVID-19 has upended economies, businesses and personal finances around the world, but opportunities remain in a few sectors. Real estate heads point out that ‘those who choose to take an early position will have a better investment portfolio.’
One of the lessons the 2007-2008 global financial crisis taught investors is that those who panic-sold were unable to reap the rewards of the subsequent economic recovery. Brought about by excessive risk taking and the greed of banks, the economic crisis was seen as the worst since the Great Depression of the 1930s.
Until COVID-19 spread across the world at the beginning of 2020.
The 2019 corovirus has upended economies, businesses and personal finances around the world. We are all in a nightmare that experts predict will continue for years to come. It doesn’t help that our government’s lack of a coordinated nationwide response has been fruitless. Still, opportunities remain in a few sectors — real estate being one of them — for those looking to strengthen or diversify their investment portfolios.
Property consultants Colliers projects land values in Makati CBD and Fort Bonifacio to drop by 10 percent or P773,000 sqm. and P745,000 sqm. respectively by the fourth quarter of the year.
On the commercial side, the two-month lockdown and lack of public transportation have led offices to rethink their work setups and continue WFH at some level, which means a slowdown in leasing activities that may extend to 2021 or 2022. And while malls are now open at limited capacity, people’s fears about their own safety are still keeping many consumers away.
Jan Custodio, senior director for research and consultancy of Santos Knight Frank, says, “A number of property owners that we have spoken to are not in a rush to sell and some are even looking to make a purchase. This is a sign that a number of owners have maintained a strong cash position, most likely learning the lessons from the 1997 Asian financial crisis and the 2007 global financial crisis. Looking for discounts will also be a challenge as distressed sellers will be hard to find and they will still try to hold out for the best price possible. If you were to find one, it’s best to keep close tabs on them because the longer they hold out, the higher the chances that they would sell and the better the position for the buyer to ask for a discount.”
We asked heads of the top real estate companies two questions: Is 2020 the right time for buyers to invest in property, or should they wait until next year or possibly longer? And for the big picture, how will property investment help the economy?
Thomas F. Mirasol, president and COO, Federal Land
The strength of real estate as an investment has always been its stability — property values are not as volatile as stocks and are a more reliable store of value than the so-called “investments of passion,” such as collectibles, jewelry and the like. From what we’ve learned during the quarantine, we have already begun to see early signs of a shift in consumer preferences when it comes to property. Consumers are looking for bigger open spaces, self-contained community integration, and reliable property management. When that becomes more mainstream — and we think it will — those who choose to take an early position will have a better investment portfolio.
When it comes to economic impact, real estate is one of the most resilient industries. We know that demand will eventually surge. Investors who have the means will use the opportunity to get ahead of the game before that happens and invest at a relatively lower market price. Should an investor decide to delve into the residential rental market, they should enjoy better yields. On the other hand, investors who are buying for their own use are in an even better position — the longer they hold on to it, the more capital appreciation they should enjoy.
In the bigger scheme of things, investments in real estate create a ripple effect on economic growth and vice versa. At its core, an active real estate industry generates taxes for the government and jobs for the community. Plus, with the shift to township and integrated developments, real estate projects stimulate sustainable public consumption — creating venues for the public to purchase goods and services that would otherwise be absent if not for the development of idle land. All of these contribute greatly to the national GDP.
Real estate is also one of the industries that the government is looking at to help jumpstart the economy after this pandemic is over. There are certain fiscal policy measures being developed to support investments in residential property in strategic growth centers around the country. This, together with the administration’s continued focus on developing crucial infrastructure, point to a more robust real estate industry especially for properties near mass transport systems, toll roads, airports, and tourist destinations.
Leonardo T. Po, executive vice president and treasurer, Arthaland
History has taught us that the property market is cyclical, and that opportunities exist during both good and bad times. Our present situation has highlighted the need for more efficient, safer and more resilient real estate developments. The ability to discern the right type of property for investment is quite important, given the new normal. Some of the things to consider are the project’s location, its quality, the expertise of the property management company, and the reputation of the developer. The pandemic has made people more health conscious, more focused on spending money wisely, and more attuned to the environment. Therefore, both end-users and investors will now be looking for properties with more health, green and business continuity features. Sustainable and wellness-certified properties offer a lot of benefits, such as lower density to reduce the risk of disease transmission, reduced electricity, water and resource consumption for lower operating costs, improved indoor air quality, more access to daylight and green spaces for healthier surroundings and increased productivity. These benefits can generate higher customer demand, which will result in a good long-term investment.
A vibrant real estate sector is a key pillar of any economy. The resumption of real estate industry operations will have an immediate positive impact, as it is one of the major contributors to the country’s Gross Domestic Product (GDP), and its overall business ecosystem. It will have a big impact on job creation and the reduction of unemployment since construction is labor-intensive, and would help provide employment opportunities to many displaced workers. The real estate industry has a long supply chain and it links with other large capital-intensive industries such as steel, cement, tiles, glass, paint, fittings materials, equipment, and technology. It will create a catalyst for restoring growth in the Philippine economy.
However, the industry will have to adapt to the new normal of working in a post-COVID environment. The correct safety protocols and procedures must be in place to ensure that construction sites are COVID-free to prevent the further spread of the pandemic. Real estate developers must likewise adapt the proper policies to ensure that the companies, and that their customers and stakeholders are safe.
The Philippines’ strong macroeconomic fundamentals will provide forward momentum and a quicker recovery after the pandemic has subsided. Our country’s young working population, dynamic consumer-based economy, strong banking sector, growth in national infrastructure and stable fiscal management are expected to drive the demand for commercial, industrial, logistics, and residential sectors of the real estate industry.
Nova J. Noval, COO, Be Residences
Absolutely, 2020 the right time for individuals to invest in property. It might seem odd to think of property investment or any investment in this global health crisis, but real estate will always be a sure thing. And indications show that among the industries first to bounce back is the property sector. Developers have been scrambling for market share with outright discounts, low reservation fees, extended downpayment terms and attractive promos. For those with disposable income, now is the best time to capitalize on the opportunity.
Also, the fear of the unknown has sparked a renewed desire to be in a comfortable and safe home, which we project will extend over a period of time. Residential condos and homes will be designed with these factors in mind. The crisis buyer is not only careful where he parks his cash but also puts a premium on quality and assurance.
After a number of areas were placed under GCQ, the market interest has substantially picked up. And once confidence is restored, property prices will most likely go up. If you wait till next year, property prices will have increased by as much as six percent, and the payment terms won’t be as favorable.
The property sector has been on an upswing for 10 years now. So instead of a possible overheating, this two-month pause prepares us for a softening of the market. The good thing though about Philippine property is that there is a real demand with the over six million units housing backlog. Hence the forecast year-over-year (YOY) is still a positive growth rate.
Construction for most pre-selling properties has been delayed even prior to ECQ — and the quarantine restrictions further extends this delay. Increased confidence among property buyers will in turn boost developer confidence to hasten and catch up with construction timelines. This entails more workers needed on construction sites and an increased demand for construction materials. Construction is also among the priority measures of the government to kickstart our economy.
A boost in demand, supported by low-interest rates, will gain buyers’ confidence to invest in property with the help of bank financing.
Cris Zuluaga, AVP, head of Project Development and Commercial Lot Sales, Ayala Land Estates Inc.
Real estate has always proven to be resilient even during difficult times. The property market will bounce back from this crisis stronger and it will be good for people to sustain their interest in real estate investments. Ayala Land has seen this work for many of its buyers in the past who invested during a downturn, and given our strong track record, they are now reaping the benefits of growth and higher land values. Now is an excellent time for those who have the available funds to look into opportunities in the property sector as these could prove to be worthwhile investments later on.
Joanna Marie Soberano-Bergundthal, VP, marketing and HR director, Cebu Landmasters
For those with disposable income, whether looking to purchase property for investment or looking to buy their first home, now is a good time and there is no need to delay due to the crisis. Property payment terms are made more accessible today, allowing more people to purchase their own home.
The importance of having a secure and stable home is heightened significantly because of the pandemic, and some developers have adjusted their terms to respond to this need. Also, real estate is a smart and reliable investment — prices will always continue to appreciate and this will give better returns than keeping savings in the bank. Property seekers now will just have to choose well and be extra selective. Find a property that has the right basics in place — good location, good quality, value for money and reliability of the developer to deliver.
The real estate sector is definitely a key contributor to the Philippine economy. Investing in property today will keep the industry alive and flourishing — that’s jobs to construction workers, and the whole real estate workforce. We hope we can continuously support the property sector, especially to further fill housing backlogs in our country for families in need of safe, affordable, quality homes.
In Cebu Landmasters, we have not adjusted our property prices as we have set our pricing competitively and reasonably from the start. However, we are being flexible with our payment terms, stretching the equity period to make it lighter to the pockets of our homebuyers. We understand how essential it is for everybody to invest in having their own home — especially today — and people are realizing this while we have been confined in our homes for the past months. Hence, we adjusted our terms, customizing them per project based on the capacity to pay of our target buyers, while digitalizing our transactions. As a result, we are glad that inquires and sales have been good so far. The market has responded positively and we aim to continue to do what we can to support the home buying goals of our VISMIN buyers throughout this pandemic period and after.
Noli D. Hernandez, executive vice president for sales and marketing, Megaworld
Among the important lessons we can learn from this pandemic is the importance of choosing where to live. When Singapore eased up on their quarantine, people’s need to take their vaunted mass public transport spiked up their number of cases. Megaworld’s pioneering live-work-play townships offer a safer and more convenient alternative as it limits, if not totally eliminates, not just the normal hassle of commuting, but the added hazards associated with it.
Despite the understandable gloom pervading the markets — and actually because of it — 2020 is the best time to consider investing in real estate not only because of what we’ve learned during this pandemic but mostly because it remains to be the most solid and reliable store of value in these most trying and uncertain times.
At the same time, any investments made in real estate goes a long way in helping the economy get back on its feet. The multiplier effect of any such investments still guarantees the highest among any other industries, creating jobs and stimulating a myriad economic activities downstream. In short, any real estate investments made, especially at this time, is an investment in our collective futures.
Henry L. Yap, SVP and business unit general manager, Robinsons Land Residential Division
In the Philippines, real estate prices do not go down as much as other countries in a market downturn. Moreover, property prices are not as volatile as stocks, bonds and other financial instruments. As such, those in the know, as well as those with the foresight, would take this opportunity to invest in real estate.
Seasoned investors realize that they have more buying power because they can scout for better deals, and utilize lower cost funds to buy and hold on to real estate. In the meantime, their strategy allows them to generate rentals/returns in the interim, while providing a source for capital growth and value appreciation once the economy improves.
Investment in real estate is also considered a hedge against inflation. The long-term potential of a higher resale price makes it a valuable asset to acquire in times of crisis. Property investment has always played a big part in any growing economy and vice versa. Increasing personal consumption and expenditure result in entrepreneurs’ demand for more commercial shops and businesses, expansion of manufacturing plants and logistic sites, and demand for more business spaces. Improved income pushes individuals and families to seek better quality of life through upgraded housing, wider availability of amenities, and demand of better community facilities, services, and improved environment.
It may be difficult, for now, to map out specific next steps for the Philippine real estate industry because the reality is, everything remains fluid and in transition.
Uncertainty still hangs in the air as economies continue to grapple with and reel from the impact of COVID-19. In several webinars over the past few weeks, property consultancy firms and stakeholders have already announced revised forecasts and estimates, with expectations of tempered real estate activity—which means slower to no demand and softer prices, as expected during a crisis.
Stable, resilient
Some, however, chose to remain optimistic and look for opportunities amid this unprecedented crisis. And there may be reasons to be so.
Despite the fact that several segments such as commercial (malls) and hospitality (hotels and resorts) took a massive, direct hit when this health crisis erupted, some believe that real estate will remain resilient while others bank on its stability as an asset class. It should be noted that prior to the outbreak of the COVID-19 pandemic, real estate is regarded relatively as a strategic asset class as it can offer stable returns, passive income, diversification, and leverage.
“The impact of the COVID-19 pandemic has been swift and immense as evidenced in the immediate economic, lifestyle, and structural shifts experienced across the globe—and the Philippine real estate market has been no exception… While the current outlook remains uncertain, we project the Metro Manila real estate market to remain resilient as the industry continues to adapt to the changing environment brought about by the pandemic,” Janlo de los Reyes, head of research and consultancy at JLL Philippines, said in a report published in April.
“Real estate has just been a lot more stable asset class historically and definitely is right now… Real estate for the long play is a pretty safe and stable asset to hold, that’s why a lot of people hold it,” KMC Savills managing director Michael McCullough said in a briefing via Zoom.
Residential real estate
Although a slowdown in take up and project launches is expected, the residential real estate market in particular is seen to remain stable over the medium- to long-term according to Enrique Soriano III, executive director of Wong+Bernstein Advisory.
Soriano pointed out that there is still a huge unmet demand for housing in the range of 6 million units and that investors still trust property as a solid long term investment.
“It all boils down to the two Cs—certainty and confidence. The current decline in buyer and seller activity is only temporary because of the enhanced community quarantine and travel restrictions and the uncertainty brought about by the pandemic. The crisis has affected the global economy. Whether it is the 1997 asian financial crisis, the 2008 global financial crisis, or the SARS outbreak in 2003, we can always expect potential buyers to delay any property purchase,” Soriano said in an interview with the Inquirer.
“However, when ECQ restrictions are lifted and consumer confidence is regained, we can bank on buyers and sellers to resume their trade. It may not be as robust as pre-ECQ, but we can assume residential demand to slowly pick up. Why? When we see indicators like lower interest rates, a sign that the curve is flattening, and the awareness of virtual tools that minimize the risk of infection, we can anticipate a gradual increase in home purchases,” he further explained.
Attracting buyers
In a separate interview, Noel M. Cariño, national president of the Chamber of Real Estate and Builders’ Associations Inc. (Creba), agreed that there is still potential for take-up in the residential market since the housing backlog is still growing. This, however, will depend on how the industry will adjust to market realities.
Cariño cited for instance the need to pursue incentives for companies to thrive in the current business environment. Property developers may also have to adjust their payment terms or provide better discounts that could help attract homebuyers and investors.
“If the big developers (offer) terms that will motivate the market to consider, then they will buy. The market needs a special reason to let go of his money today… And I see this going for next 12 months up to the first quarter of 2021. From June to December, developers must come up with aggressive terms for the market to react,” he said.
‘Intent to buy’
Gerfer Mindoro, senior manager for research and consultancy at KMC Savills, meanwhile reported that on the consumer side, “there will be postponement of major purchases this year” against a backdrop of economic uncertainties.
He said this will be largely felt in the low income households because they are the most of vulnerable in times of economic disruptions and thus likely to prioritize the purchase of essentials. But the mid-market segment “may still have a steady stream of cash from receivables during this period, and sales is expected to be sustained post-COVID.”
Those in mid market segment, Mindoro added, still have the capacity to pay and so the “challenge now to the developers is to convert that capacity to pay into an intent to buy a property.” He said they expect property developers to offer promos and discounts of about 10 to 15 percent, especially for the ready-for-occupancy (RFO) units to encourage more buyers and protect their market share.
THE Philippine real estate sector may become more “active” next year, as the economy is anticipated to bounce back after the pandemic subsides.
“Our view is that the recovery of the property sector in 2021 hinges on the pace of expansion of Philippine and global economies. Given a strong rebound of Philippine growth in 2021, a more active property sector is also expected,” Lyn I. Javier, BSP managing director for policy and specialized supervision, said in an e-mailed response to BusinessWorld earlier this month.
Ms. Javier cited historical data from property consultancy firm Colliers International Philippines that showed demand for segments, particularly office and residential, usually wane in the wake of an economic crisis.
Colliers International has said land values in the National Capital Region may decline by 5-15% in the fourth quarter of the year, as rental rates and selling prices plummet. Take-up rates across property segments are also seen to slump.
“Following the lower projections of real gross domestic product (GDP) growth in 2020, it is expected that impact across all segments, depending how long the crisis will be resolved, could be seen,” Ms. Javier said.
The country’s economic output shrank by 0.2% in the first quarter of 2020, the first contraction since the fourth quarter of 1998 during the Asian financial crisis.
Ms. Javier said the country’s banking industry is armed with a “strong position” to weather the crisis, including risks that may arise from the property segment.
“Banks have sufficient capital and liquidity buffers to withstand potential loan losses and liquidity constraints posed by the current ECQ (enhanced community quarantine),” she said.
The banking industry as a whole, Ms. Javier said, has maintained key metrics beyond regulatory minimum, including the capital adequacy ratio of 15.4%, a liquidity coverage ratio of big banks at 169.9%, among others.
“This is reflective of the sound underwriting practices of banks,” Ms. Javier said.
“Preliminary assessment disclosed that the expected rise in their NPLs (nonperforming loans) could be readily covered by their loan-loss provisions and capital buffers,” she added.
The best places to do business for 2020 have been revealed.
Very few executives could have predicted a virus originating in China would lead to worldwide economic devastation in 2020. Just four months after the first official reports of the COVID-19 outbreak in Wuhan, more than three million cases have been confirmed globally, and with this comes exponential economic unrest.
The pandemic could possibly trim global economic growth by 2% while global trade is predicted to plummet by up to 32%, according to Congressional Research Service.
Stock market uncertainty and businesses facing unprecedented challenges, many of which won’t be known until the peak of the health crisis hits, makes for a suitable time to look at the best places to invest.
The world’s best countries to invest in or do business in for 2020 have been revealed by CEOWORLD.
The study analysed 80 countries according to business and investment environments. Corruption, freedom, workforce, investor protection, infrastructure, taxes, quality of life, red tape and technological readiness were among the factors taken into consideration.
Singapore topped the list for the 2020 edition as the most attractive nation for investors and businesspeople.
The UK was ranked second followed by Poland, Indonesia and India; however, it’s important to note the results do not take into consideration the current pandemic and any effects the health crisis may have on the economy.
Comparatively, Iran was ranked 80th on the list, just below Saint Lucia, Dominica, Grenada, Saint Kitts and Nevis, and Antigua and Barbuda.
10 top countries for investors in 2020*
Singapore
The island city-state was crowned the best nation to invest in or do business in for 2020 with a total score of 86.087.
Singapore
2. The UK
Coming in at second place, the UK was found to offer the next best opportunity for investors with a total score of 84.494.
London, UK
3. Poland
Perhaps an unexpected entry for many, the Eastern European nation was found to be one of the top-tier places for investment, ranking highly for market potential and institutional framework.
Poland
4. Indonesia
In fourth position, the popular holiday destination for Australians received a total score of 82.978.
Indonesia
5. India
The South Asian nation scored highly in institutional framework followed by education and research.
India
6. Australia
With a total score of 82.305, the continent performed well across all sectors including education and research, market potential and trade openness.
Whitsundays, Australia
7. Philippines
Described as being the tech hub of Asia, the nation scored the seventh best place for businesspeople.
Manilla, Philippines
8. The US
While the country has the highest number of confirmed coronavirus cases in the world, it was ranked in the top 10 best countries to invest in for 2020 – before COVID-19 swept the globe.
New York City, US
9. Malaysia
The fifth Asian country to make the top 10 recorded a total score of 81.021, fairing the best in institutional framework.
Malaysia
10. Czech Republic
The landlocked central European nation is among the leading places for investors for this year.
THE residential real estate sector is seen to sharply recover first once the Philippine economy bounces back from a pandemic-induced crisis.
Amid the public anxiety over the negative impact of Covid-19 and lockdowns on businesses, housing prices have remained stable and home buying activities have remained upbeat, particularly in the Visayas and Mindanao areas.
“The first that will bounce back is real estate,” said real estate broker Anthony Gerard Leuterio, who is the founder of Filipino Homes and Leuterio Realty and Brokerage. “Despite the alarm, housing prices didn’t fall at all in the Philippines. Majority of the housing prices stayed the same at pre-Covid levels.”
Leuterio said the current crisis appears to be different from the crises that happened in 1997 to 1998 and 2007 to 2008 when housing prices fell to rock-bottom levels. The past challenging times were triggered by a high degree of debt in the market unlike today when businesses are forced to close and people simply not being able to work.
“Everyone now values the need to invest in real estate. It is the most valuable asset today that never depreciates in value,” said Leuterio.
Despite the pandemic, Leuterio who has established a solid footing in real estate through the Filipino Home offices across the country, saw more buyers probing for properties since the various stages of lockdowns were implemented.
He said even as people are isolated in their homes, a lot of things are happening online, which he believed will accelerate the economic recovery. Brick and mortar business owners turn to online shopping and deliveries while real estate agents doubled their marketing efforts in selling properties online.
“The brokerage community is using technology to their advantage,” he said. This explains the robust home buying activities amid the pandemic.
“There are plenty of buyers. Many of them have already decided to purchase properties even before this pandemic,” said Leuterio, adding that this buying activity will continue amid reports of job losses as companies have quickly adopted the work-from-home arrangements and ventured into various online platforms to sustain their businesses and keep their workers.
Better deals, new designs
Moreover, Leuterio said this pandemic has opened opportunities for real estate developers, sellers and buyers.
He said more developers will now invest in building sustainable homes and building sustainable communities as people look for properties in a place that offers a good lifestyle and a high-quality healthcare system.
“There will be a trend of ‘new normal’ home designs,” he said. These lockdown-ready home units feature productivity spaces, and a space for garden and gym, among others, which weren’t typically offered in pre-Covid times.
For brokers, the lockdown experience will compel them to seek more innovative ways to keep their careers. In the past months, Leuterio said they have beefed up their webinars on skills trainings and market education to boost knowledge and reach out to more prospective buyers.
On the buyers’ end, Leuterio said they will score better deals in the post-Covid landscape as developers offer freebies and attractive monthly amortization, plus the low interest rate now being offered by financial institutions.
“Developers in the Visayas and Mindanao area are pricing their projects conservatively to make them attractive to buyers,” he said.
By Jan Večerka, chief executive and founder of BrikkApp
The coronavirus is currently devastating the economies of nations around the world, with many countries attempting to precariously balance health and economic interests. As a result, nearly every industry has taken a hit as people simply can’t afford as much in light of the current crisis.
But what does this mean for the real estate market? Simply put, is it safe to invest?
Though property sales in the UK are currently down, there have already been signs that the COVID-19 situation can lead to even higher confidence in real estate investing. In fact, property is a much safer investment than you might think during this crisis. Here’s why.
Compared to other forms of investment, real estate is stable in the long-term. Stocks, for instance, carry with them a lot more volatility and are much more affected by economic crises. On the other hand, in commercial real estate, the influence of COVID-19 won’t be seen until much later because of the nature of the market.
Another benefit investing in real estate offers is the fact that, unlike stocks, they are a physical asset that you can actually use – even if the overall value depreciates, you’ll still be left with a physical asset. Real estate is simply a much safer option for those willing to invest.
Let’s look at the most recent disturbance to global economics, the 2008 financial crisis. While each market was different, most real estate markets fell between 20% – 25%, including the UK at 20%. Stocks, on the other hand, fell much more rapidly in just a few weeks and didn’t recover quickly. By 2009, the Dow Jones fell 50% – the biggest drop in the stock market since the Great Depression.
Of course, we’re still relatively early in the pandemic so we don’t have enough information to accurately predict how things will play out – we don’t know how long the economies of the world will be shut down, when people will be able to leave self-quarantine measures, and when people can begin spending money again. Therefore, it’s hard to predict exactly how the real estate market will look like in the near future.
However, we can use market reactions to previous pandemics as indicators for the future. SARS and H1N1 both caused short-term volatility in the real estate market, but the market stabilized within three to six months in each case. Even in disaster scenarios such as the current one, real estate remains relatively stable and will continue to be one of the best places to invest in.
How to lower risk when investing
Even though real estate has a good risk to yield ration, there are still several best practices – in times like this, the less risky you can make your investment, the better.
New equity projects could be a good place to invest as, if property prices go down, you stand to receive solid returns on your investment. The best bet is to search for investments that are safer and to invest in several low-risk properties through crowdfunding.
Debt investment opportunities are perhaps the safest form of investment at the moment. While you’ll get a much lower return on investment than other types, there’s also a much lower chance that you’ll lose money. During crisis scenarios such as this one, low risk is always the preferred option. Mezzanine debt, which is essentially between equity and debt, offers higher risk than senior debt but is still more stable than most equity investments.
We expect to see banks significantly reduce their financing of new developments, meaning there is a new opportunity for alternative financiers to fund properties. Central banks are already announcing they will be lowering interest rates and interests on savings accounts.
Future of real estate investing
Crisis changes things: With every crisis, society shifts to become more productive. This is the same within any industry. Economic crises tend to have long-lasting effects on the way people approach decision-making. When it comes to real estate, we won’t be able to see the exact effects of COVID-19 for months, if not years.
In response to the digital age, the general trend in every industry is a need to go online and form a direct relationship between customer and product. The same trend has been occurring in the real estate industry, where more people have been choosing to get rid of the middleman and invest directly online.
Direct online investment, beginning in 2012 in the United States and rising rapidly in the rest of the world, is likely to only continue to grow during the next few years. While still relatively new in the UK, the country already hosts over 40 real estate crowdfunding platforms – and this is only expected to grow.
Commercial real estate is struggling to adapt to the effects of social distancing, with COVID-19 effectively exacerbating a trend that was already advancing rapidly. Also, with people less likely to hold significant capital than before, real estate crowdfunding is a much safer investment. When the smoke clears after COVID-19, crowdfunding will likely hold a higher share of the real estate market.
Four months into 2020 and nearly the entire world has been forced into some kind of economic hardship. However, for those with the capital to spend, real estate is one of the safest forms of investment during these difficult times.
Do you plan to buy condos in The Philippines? To get in touch with an experienced agent on Mobile/Viber/WhatsApp, Dial +639176870127
Philippines is one of the fastest-growing countries in the world and continues to attract foreign investors and companies in vast numbers.
Metro Manila deservedly gets the most attention as it’s the capital, business hub, and accounts for a third of the countries GDP growth. Simply put, most things happen here.
Looking at investment preferences, buying newly built condos is undoubtedly the most common option among foreigners. Yields can be exceptionally high at the same time as the buying process is simpler and involves less paperwork.
Still, it’s important that you learn about the property market, the most promising areas, and what prices you can expect to pay when buying condos in Manila beforehand.
Manila’s Real Estate Market
Manila’s real estate market has grown much since 2010 since the economy really started to take off. With a 6% – 7% yearly growth the residential sector and office sector have flourished and attracted much foreign investment.
The main reasons behind the rise are:
Increasingly more offshore companies operate in the Philippines
Outsourcing from China
Continuous supply of flexible workspace
Bigger influx of Chinese buyers
High remittances from overseas. Philippines is the 3rd biggest country in the world in terms of receiving remittances from Overseas Filipino Workers (OFW)
Increased wealth among locals
Many claim that Manila is the best place to buy property in Asia at the moment thanks to its healthy market and promising future.
Purchasing a condo is easier compared to local flats and villas, we see buyers from Singapore, Hong Kong, and China snapping up as many as 20-30 units at a time. The buying process is also fairly straightforward at the same time as you’ll be able to earn yields stretching well above double-digits from time to time.
Not surprisingly, foreign property buyers who target Manila want to allocate cash and find investment vehicles that can give good returns.
Besides, many of the leading real estate companies claim that Metro Manila is the most affordable capital city in Southeast Asia for office space. It’s said to be the 3rd best global destination for business process outsourcing globally, having the lowest vacancy rates for office space regionally.
Overall, Manila’s real estate market continues to stay bullish and many analysts believe it will continue like this in the coming years. There are plenty of upcoming areas that should be of interest, something we will review later in this article.
The Best Places to Buy Condos in Manila
When talking about Manila, many people refer to municipalities or cities, like Quezon City or Makati. Having around 24 million inhabitants, Metro Manila is huge and actually consists of different cities.
Manila is the capital and located in the central parts of what is called “Metro Manila”. It’s small by comparison and the most densely populated place in the world, outperforming cities in India, Singapore, and Hong Kong.
Many get crippled by the mixture of Asian culture and traces from Spanish history that can be found here. You’ll find colonial buildings and churches dating back hundreds of years ago.
It can proudly say that it has the oldest Chinatown in the world, dating back to 1594.
Surprisingly, there are not many condos in Manila, as it’s a bit overcrowded with people and historical buildings. Instead, you need to look in municipalities and cities surrounding Manila.
Let’s have a look at the most popular and promising areas in Metro Manila.
Buying Condos in Makati
Makati is located Southeast of Manila and famously known for being the financial hub.
Here, you’ll find the tallest skyscrapers, many multinational companies, shopping malls, restaurants, colonial era-churches, and museums. Thus, it’s not surprising that Makati is one of the most popular districts to buy condos.
Even if Makati is Manila’s equivalent to Manhattan, property prices are still surprisingly low and far below those in Singapore, Hong Kong, and many other big cities in Asia.
Makati is one of the best performers in terms of capital appreciation where prices have increased by double digits yearly. Below, you’ll find the average price increase for 3-Bedroom condos in Makati:
2018 – 15.55%
2017 – 10.40%
2016 – 9.95%
2015 – 13.43%
2014 – 7.11%
2013 – 14.37%
Buying Condos in Quezon City
Quezon City is located in the northern parts of Metro Manila. Being the capital from 1948 – 1976, it’s the biggest city in terms of land area and has around 3 million people.
Condo prices are lower compared to the central areas and Makati. This brings more opportunities in terms of future capital appreciation. In fact, Quezon city grows fast and has many top universities and many international companies set up offices here.
Cubao is the financial hub of Quezon City and some people predict it will overtake Manila’s position as the main financial hub of Metro Manila.
Balara and Commonwealth are just a couple of densely populated residential areas that have numerous gated residential communities.
Buying Condos in Taguig
Taguig is located in the Southeastern parts of Manila with a population of almost 1 million people. Starting as a fishing village, it’s now a developed area with many high rising condos, corporations and malls.
Bonifacio Global City (BGC) is one of its newest establishments and currently one of the most interesting areas for investments. We can mainly thank its proximity to Manila for the upswing seen in financial and commercial activity in the past years.
Previously being under the use of the army, BGC has emerged as a business hub. Here, you can find many high-rise condominiums and gated communities.
Buying Condos in Pasig City
Pasig City is another upcoming area that has much residential real estate, mainly in the middle and upper-class segment.
There are some commercial activities going on here as well.
Ortigas Center is just one of the business districts that grow quickly. You’ll find many hotels, shopping malls, and multinational companies that open offices in Pasig.
Manila Condo Prices
As mentioned, Manila has surprisingly cheap real estate, even in the most central and developed areas.
Real estate prices average at almost USD 2,600 per square meter in the central areas which places the Philippines as the fourth cheapest country to buy real estate in Asia.
Buying in suburban areas is significantly cheaper and will only set you back only around USD 1,200 per square meter on average.
Now, let’s have a more thorough overview of the different price levels for residential real estate in the most promising districts and cities.
Makati Condo prices
Makati is (not surprising) the most expensive area to buy condos.
According to Numbeo, the average price in the city center is PHP 190,000 per square meter, which equals to around USD 3,600 per square meter.
When looking at various small-sized 1-Bedroom condo units on Lamudi’s website, you’ll find condos that start from USD 80,000 – 100,000 per unit.
Quezon City Condo Prices
There are both real bargains and high-end units to be found in Quezon City. As the city is the biggest in terms of land area, you’ll find a great variety of properties.
According to Numbeo, real estate prices average at around PHP 57,000 (USD 1,096) per square meter.
You can find small 1-Bedroom units starting from as little as USD 10,000.
Still, you probably want to find condos with a higher standard. In Eastwood, which is a popular area, you can find a big 2-Bedroom unit for as little as USD 80,000.
Below I’ve included a list with popular areas and the average prices per square meter for condos:
EDSA: USD 900-1,000 per square meter
Aurora Blvd (Cubao Area): USD 750 – 900 per square meter
C-5 (E. Rodriguez Ave.): USD 750 – 900 per square meter
East Ave: USD 600 – 900 per square meter
Quezon Avenue: USD 600 – 900 per square meter
Taguig Condo Prices
There’s a bigger supply of condos in Taguig compared to Quezon City.
You’ll be able to find spacious 2-Bedroom units for as little as USD 100,000 in places like Fort Bonifacio Global City.
You can also find newly built small studios for as little as USD 40,000 – 50,000.
Pasig Condo Prices
Pasig is a bit more expensive than Quezon City, both in terms of rental values and condo prices.
2-Bedroom units start from around USD 60,000 – 80,000.
Conclusion
The Philippines has one of the fastest-growing economies in the world, where Manila leads the way. Some analysts say that Manila is the best place for real estate investments at the moment, which makes it a highly interesting investment destination.
The market has performed exceptionally well since 2010 and prices have increased by double digits in places like Makati.
Even if the market has been bullish for years, and we’ve seen great price increases in places like Makati, the market will most likely continue upwards for a couple of years.
The increased inflow of Chinese buyers increased wealth among locals, offshore companies, and high remittance from overseas workers have had much impact on the market.
Makati is the most expensive area to buy real estate, while you can find real bargains and good investment opportunities in places like Bonifacio Global City (BGC) and Quezon City.
FAQ
How long can you own a condo in the Philippines?
There’s no limitation to the time you can own a condo as you can buy these on a freehold basis. You can only lease land with a period of up to 50 years and with sometimes with an opportunity to renew the lease for up to 25 years as a foreign individual.
How many condo units can I buy?
There’s no official limit to the number of units you can buy as long as the foreign quota of 40% isn’t filled in a specific condominium project.
