Huge discounts, promos seen to dictate PH real estate market trend

Huge discounts and aggressive promotions will dictate the mode among developers post COVID19 as vacancy rates in Metro Manila could jump as high as 25 percent on reduced capacities of BPOs and higher supply, according to a real estate services and brokerage firm.

Michael McCullough, managing director of KMC Savills Inc., said during its webinar on COVID-19 Impacts to the Property Sector & 1Q Metro Manila Office that land prices could see some high discounts of up to 20 percent.

Gerfer Mindoro, senior manager for research and consultancy of KMC Savills Inc, that developers are expected to offer attractive payment schemes.

“Developers offer promotions and discounts to unload their FROs (ready to occupy condominiums),” Mindoro said. For instance, he said, developers could offer longer down payment period, bigger discounts for pre-selling rates and other incentives to unload RFOs, which are source of immediate cash flow.

Fred Rara, KMC Savills senior manager research and consultancy, said that temporary dips in prices are expected in the next month or two. He also said that buyers should outweigh the sellers if they take advantage of the low prices along with the low interest rates being offered by banks.

In terms of vacancy rates in the central business districts (CBDs) in Metro Manila, McCullough noted that Ortigas has the highest inventory at 25 percent, but Makati (1.7%) is still safe and Bonifacio Global City (3%) have lots of optimism for shared service facilities. Bay Area has lower vacancy rate at 3.7 percent, Alabang at 4.5 percent, and Quezon City at 11.9 percent.

For the office sector KMC Savills said the adoption of telecommuting or work from home policies could reduce office space demand in the long run.

But, offshoring is still expected to flow into the Philippines because of the country’s cost competitiveness. The hospitality sector is also expected to take a longer hit and is expected to get back only by next year when governments are expected to ease border controls.

The industrial sector though particularly the logistics industry could be a big beneficiary. The transition towards modified community quarantine may give logistics sector a head start as new policies are introduced to jumpstart the supply chain.

With the pandemic exposing the vulnerability of the global supply chain’s dependence to China, KMC Savills said that some countries grant incentives to relocate their production outside of China.

“Philippines should focus on industrial locators who want to leave China,” said McCullough as he noted that some Japanese firms in China are going back to Japan. Some Japanese manufacturers have presence in Cebu, but the Philippines is only number 5 relocation sites for industrial firms. Most, he said, are being captured by Vietnam.

With slower demand, KMC Savills said there will be fewer project launches as developers slashes their capital expenditures and adjust their cash flow strategies. As a result, there will be delays in project construction due to supply chain bottleneck and lack of labor due to ECQ.

Income disruption would result into receivable losses in the socialized and economic housing segments. The mid-market segment may still have a steady stream of cash from receivables during this period, and sales are expected to be sustained post COVID-19.