The real estate sector: resilient, optimistic and challenging

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Next week, the country will elect a new president.

While some presidential candidates have miserably presented their hollow housing policies and mindlessly assured the public with “better lives for all” rhetoric, those in the real estate sector seem to have ignored these lofty promises of incremental change and have continued their development initiatives and sell more homes, horizontal and vertical projects.

Politics aside, it’s business as usual for the resilient real estate industry.

Optimism

Let me be clear about the outlook for the sector this year. After two years of slump and barring major geopolitical shifts and worsening tensions between major economic powers, the presidential election offers optimism for the sector, whatever the outcome.

There is no doubt that buyers and sellers are ready to pounce again on great deals, just like at pre-pandemic levels.

“There is clearly optimism within the real estate industry for its prospects in 2022, and there is undeniably a weight of capital available for investment,” said Anita Kramer, senior vice president of the Center for Real Estate Economics and ULI’s Capital Markets.

Real estate investment is a priority for institutional investors in the traditional and alternative sectors because the risk remains low and the rates remain attractive.

Significant movements

In the first quarter, our research team tracked and observed significant movements in the asset classes and the once listless market appears to be well on its way to its normal trajectory.

It is important to note that the overall residential inventory continued its downward trend from mid-January, while median prices slowly increased. This is a good indicator that buyers are now on the lookout for bargains.

After almost two years of keeping their savings earmarked for real estate investing, buying is the only option they have left. The encouraging trend isn’t just consumer-driven – forward-looking developers are leveraging flexibility and convenience.

For completed projects, we have found that equity or installments are offered for as low as 5%, with the balance extending up to 36 months interest free! These are ready-to-occupy homes and condominium units located in prime locations, but offering favorable cash flow conditions, suitable not only for discerning end users, but also for investors.

You can still get these great deals even in major business districts like Makati and Bonifacio Global City and as far as Cebu.

Price points

Another sign of a revitalized sector is the price.

Developer-owned inventory was flagged for new pricing this quarter. Stakeholders await the end of the elections. Even for projects outside the Greater National Capital Region, including Cebu, Davao, Iloilo and Bacolod, price increases are occurring.

Over the past few weeks, the developers I’ve spoken to are expecting double-digit revenue growth in the first quarter, year-over-year. This is a remarkable turnaround after an anemic 2020 and a recovering but lame 2021.

Store developers and even designers are revisiting many of their expansion plans that have been shelved due to the pandemic. I should know because our office has been inundated with requests for all kinds of strategic and feasibility studies.

With this supportive but muted vitality emerging, it seems that the impact of the election process on residential real estate may not be as significant as others might have thought.

Resilient sector

Two events can influence real estate sentiments in a credible election.

First, when part of the incumbent stands as a likely winner, there is an assurance that familiar policies will continue. Stakeholders will no longer be guessing at the next policy move, and housing market expectations will trigger a “business as usual” mindset for developers. Sales will certainly go north.

If the opposition party wins, people can be expected to get a little hesitant as any new presidential term will definitely affect the economy. This is why it is important that immediately after the June 30 inauguration, initiatives are amplified with a capable and visionary housing leader with clear and compelling programs.

To mitigate leadership change, business groups need to come together in solidarity. Sales may decline for a few weeks, but prices will remain stable. In most asset classes, especially residential and commercial real estate, the rebound can be quick or even instantaneous as pent-up demand springs after clarity emerges in the center of power, Malacanang.

Any fluctuations in sales volumes only occur for a limited number of weeks, but when clarity and governance come into play as favorable initiatives unfold, we can expect a building frenzy, a boost in buyer and investor confidence and naturally with the formation of another momentum is building.

Rest assured, the real estate sector will remain optimistic, resilient and challenging.

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