Property sector seen to suffer heavier damage from COVID-19, Luzon lockdown
MANILA, Philippines – The booming property market is taking a bigger hit from the coronavirus disease-2019 (COVID-19) contagion, suffering from lower office space take-ups of business process and offshore gaming firms, as well as dismal demand for new homes.
In Metro Manila, the epicenter of the outbreak, a worsening of the situation beyond June can result into a fifth of new condominiums ending up empty, up from just 11% last year and 18% seen previously for the year, property consultancy firm Colliers said in a report on March 31.
The bleak outlook for condominiums would be mainly driven by a “drop in demand and slowdown of take-up,” particularly by Chinese investors and offshore gaming firms who use the units as their offices in key areas like the Bay Area in Pasay City.
Consequently, office leases would likely drop, with the vacancy rate seen to hit as much as 8% without additional take-up from Philippine offshore gaming operators (POGOs), originally projected to occupy 300,000 square meters in spaces this year. On its previous assessment just early March, Colliers saw the vacancy rate only hitting as much as 7.6%.
“We expect an upside coming from outsourcing and traditional firms recovering in second half of 2020. If the duration of the community quarantine in Luzon is limited, these firms could bridge the gap left by POGO firms, limiting vacancy to increasing below 7% this year,” Colliers explained.
POGOs, mostly concentrated in Metro Manila, were among the businesses ordered halted during the month-long community quarantine of Luzon meant to stop the spread of COVID-19. While coming under intense public scrutiny for supposedly employing illegal Chinese workers, POGOs provide additional support to the property market, a key economic driver.
Hefty prices of condominiums alone show a good gauge of the demand for units. Latest central bank data showed that in the fourth quarter 2019, unit prices rose an average of 18.9% year-on-year nationwide, and by a faster 21% in the National Capital Region alone.
Residential property prices, including that of apartments and single houses, rose an average of 10.2% in the final three months of last year, slightly down from 10.4% the previous quarter, data showed.
“Colliers sees the completion of about 14,720 units in key districts in Metro Manila. Colliers estimates that about 79% will likely be in the Bay Rea or about 11,590 units,” the consultants said.
“These units were previously sold, and developers were able to book these at their peak price,” it added.
Apart from office and residential segments, Colliers also took note of the "immediate impact" of the outbreak on hotels, which saw occupancy rates drop to just 35% from 71% in end-2019 because of a Chinese travel ban in place since the first week of February. "We expect average occupancy rates for first half of 2020 to decine below 50% (down from our intial forecast if about 63%)," the consultancy said.
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