How Property Prices Have Changed Because of the Pandemic
Whether buying a house and lot in Pampanga or a condo in Pasig, any buyer can certainly feel the effects of the pandemic, especially when it comes to the prices of the properties.
The pandemic definitely brought chaos to the world—and the real estate industry is not singled out. All industries are affected someway somehow.
Here are how the property prices have changed due to the coronavirus pandemic.
Real estate market in the Philippines
Before we discuss the changes, though, it would be wise to determine the ongoing changes in the property market in general. The market is not open, which means brokers or agents conduct virtual tours instead of personal house viewings. Nonetheless, buyers and investors use these virtual tours to filter their choices of a property.
Also, all transactions are done either electronically or digitally because of the lockdown measures. If they already have a shortlist, an in-person inspection follows. Then again, strict health protocols are followed by both the buyer and the agent to minimize the spread of the virus.
The Philippines’ property market, however, did not stall at all. It even experienced a slight increase because of the developer-driven price cuts. For instance, the down payments are extended, and the interest rates are minimized to reduce the inventory. Buyers with disposable income chose to buy and invest due to higher savings.
Speaking of the lower interest rates, these effectively make monthly mortgage repayments more affordable than their pre-pandemic amounts. This makes buying a condo for sale in Pasig City, for instance, more appealing to the buyers and investors. With this, how the local government responded to the crisis is increasingly becoming a factor in deciding whether or not to buy
How the pandemic changed the Filipinos’ thinking
Let us not forget the psychological effects of the pandemic. First, the Filipinos realized the importance of having their own home that is safe and comfortable to live in. Many people are displaced because they are no longer able to pay rent. Some chose to go back to their provinces and as the saying goes, there is indeed “no place like home”.
Second, Filipinos realized the need to live within commuting distance to their workplace and, lastly, the need to have extra space for newfound hobbies such as planting and activities that are child-friendly. Business owners are also wanting an office setup with gardens and bigger spaces.
There would be a higher demand for rental properties, especially condos near the business districts, in hindsight. If they cannot work from home, they need to find a place near their workplace, but not permanent enough that they can go home to the province when the need arises.
How the pandemic changed the property prices and market
After almost a year of living in lockdown, the analysts fully grasp the impact of the pandemic on house and condo prices. One thing is consistent: fluctuations.
Aside from the differences in house prices, the pandemic seemed to create opposing realities for Filipinos who retained their jobs against those who lost their employment or household income source.
Price increases happen.
The rise in prices is between 5 to 8%—still meager, but it has increased nevertheless. This is mainly due to Tax Reformation for Acceleration and Inclusion (TRAIN) Law. In general, TRAIN Law aims to reduce personal income tax while imposing higher tax on certain products. TRAIN lowered the VAT exemption of residential dwellings (house and lots, condominiums) from Php 3,199,200 to Php 2,500,000.This means houses and condos that were previously tax exempt (worth Php2,500,001 to Php3,199,200) are now subject to VAT. Further, on January 1, 2021, the exemption was lowered again from Php2,500,000 to Php2,000,000.
Average sale timelines are shorter.
The average time to process a sale is around 60 days. Compared with pre-pandemic average sale timelines, it is definitely shorter. From acceptance to turnover and moving in (although the last one can be delayed due to health protocol compliance requirements), the transactions seemed more seamless nowadays. The majority of the exchanges are done online.
If not the protocols, another thing that could contribute to the delays in moving in is the renovations. That is if the property is not new normal-ready yet. It is likely that we, Filipinos, are entering a new era of doing work and school, demanding a dedicated space for a home school or work-from-home office.
In Amaia, however, contactless homebuying process known as Amaia ACCESS was introduced last year for easier transactions for the homebuyers, and contactless turnover is also being done to speed up the process and to make it convenient for the homeowners.
Mid-range buyers have more savings.
This category of buyers is considered to be the biggest beneficiaries because of the expected savings. Speaking of which, some people who are able to retain their income have become better off financially. For one, they need not spend on the daily commute (fare and petrol alike). Virtually all of us have also put off spending trips locally or abroad.
The unprecedented savings allowed the earning Filipinos to buy their first property. Those who have been saving up for this purchase have more spare cash to add to their fund. So, there is likely a higher percentage that goes to either down payment or full payment of the property.
Buyers who withdraw their down payment lose.
Some buyers who are a few steps away from owning their dream home had to take a step back by withdrawing their down payment. Some of them lose their jobs and are stretching their hard-earned money to accommodate the income loss.
There had been massive unemployment, wage cuts, and job uncertainty that led to more than 5 million Filipinos losing their jobs and another 10 million who had lowered income. With this, people are more cautious than ever in making a big investment such as buying a property.
This may not necessarily affect the buyer’s credit score. However, the lowered borrowing capacity of the person could affect finding another great deal in the future. For one, no one knows how fast they would find a job again so they can start building their capacity to pay.
House value would increase faster.
Seeing the necessity of homeownership, there would be changes in big-ticket purchase priorities.
About five to ten years from now, and with the increasing housing demand despite the relatively low supply, house values can only be expected to reach a record high. Those who choose to invest in a condo or a house and lot now will definitely reap the high returns a few years from now.
Property market predictions in 2021
The real estate market in the Philippines remains optimistic. The positive outlook is because of the availability of the vaccine. What happened is not a typical economic downturn, so we should expect the market to stabilize once vaccination starts rolling out.
Lockdown restrictions are being lifted. The economy is slowly opening up as well. The country is now entering the correction phase, wherein businesses would try to recuperate the losses. Households would start to rebuild their incomes as well.
While the year 2021 will be a true test of whether the house price growth may continue to get stronger post-pandemic, by the end of 2021, some analysts expect slow yet steady growth, while others say it would remain as is. However, the majority is optimistic this 2021.
If interested in Amaia properties or investment opportunities, do not hesitate to get in touch with us here on our website.