The Covid-19 pandemic has disrupted plans, unsettled lives, upended livelihoods, and spaned grief, anxiety and stress. The world stood still when the once-in-a-century global pandemic hit, with people confined to their homes, businesses stopped operations, and economic activities either halted or slowed down. But now that economies have reopened, industries started to pick up where they left off pre-pandemic.
Locally, one of the sectors showing off aggressive recovery is real estate. During the height of the pandemic, the industry was like a ghost town — workers vacated offices, there were no new developments, and no one could even afford to buy new properties. Yet, 2022 proved to be a significant turnaround for the sector.
According to a study by Leechiu Property Consultants, investors saw a strong and growing demand in both the residential and office sectors last year. This will sustain capital values in the near term and prod them to trend upwards for a long time. Despite recent challenges, the study pointed out a noticeable increase in the pipeline of capital market transactions.
Tam Angel, director for Investment Sales at LPC, noted that the capital values remained resilient due to healthy office and residential take-ups. Nevertheless, the growth rate has flattened in affected business districts because of rising interest rates and significant office vacancies leading to rental rates trending sideways.
Sold units up
In Metro Manila, the country’s central region, residential units sold posted steady growth — from the first quarter’s 5,852 units to the last quarter’s 11,114 units, which was 16 percent higher than the previous quarter. Nevertheless, last year’s values are still seven percent lower than the 2021 level.
In terms of the number of units sold, the upper-middle-income segment from P4 million to P7 million moved quickly at 13,000 units annually from 2020 to 2022, followed by upscale units priced from P7 million to P12 million at 9,000 units annually. High-end and luxury units have been consistently selling in the last three years.
The average capital values of units in Makati, Bonifacio Global City, and Taguig have risen to 20 percent. But rents in Alabang, Ortigas, and the Bay Area are still low compared to the pre-pandemic levels. Buyers also demonstrated vital interests in upscale and exclusively gated resort communities in Batangas, Bataan, and Cavite.
Brace for headwinds
While the numbers were good, the sector could not finally put its guard down. Thus, stakeholders should start the new year “cautiously optimistic about the prospects of the real estate industry in the next 12 months.”
In a commentary released last week, JLL, a global real estate services firm specializing in commercial property and investment management, also affirmed the bright prospects of the sector.
However, it warned that structural changes and macroeconomic headwinds might affect the industry’s growth. Notably, it noted that the high import prices might result in higher development and operational costs, specifically for construction and property maintenance, which can be a reason for delays in project launches.
“Boutique developers may face a bigger challenge as they generally have lower financial flexibility. On the other hand, major developers have stronger financial strength that can help them maneuver the current market. Meanwhile, high inflation and soaring interest rate may further tighten spending power as consumers allocate more savings to essential goods and services,” it said.
Sustained momentum
Indeed, the real estate sector is bound to have greater years ahead, and all stakeholders are doing their parts to sustain the growth as they all rush towards full recovery.
Looking at the year ahead, Ayala Land President and CEO Bobby Dy, in a chat with reporters early this week, said the company hopes to “sustain the growth momentum it established last year.” Ayala Land is the real estate arm of Ayala Corp., the country’s oldest conglomerate.
During the first nine months of 2022, Ayala Land grew its net income by 55 percent to P13.3 billion. The company’s total revenue also increased by 19 percent to P86.3 billion.
Meanwhile, Aboitiz InfraCapital, one of the leading infrastructure developers in the country, said it ushers in growth by ensuring that all of its projects are sustainable and of the highest quality — aligned to the Aboitiz Group’s Great Transformation into becoming the country’s first Techglomerate. Last year, it partnered with an electric vehicle manufacturer to secure a fleet of electric minibusses to operate the shuttle system within its 800-hectare LIMA Estate in Batangas.