Three Reasons Why Real Estate Prices in the Philippines will Fall due to the new Coronavirus
Hi, my name is Yoshi and I am a real estate consultant in the Philippines.
In the Philippines, the first new coronavirus infection was confirmed on January 30, 2020, and the infection spread since then. The first death in the Philippines was confirmed on February 1, and lockdown (Enhanced Community Quarantine) began on March 15, with most companies banned. Finally, the ravages of the new coronavirus are coming to an end, and in June, the “general community sequestration (GCQ)” life has begun.
The real estate in the metropolitan area of Manila in the Philippines has been steadily increasing in price for the past 10 years. If the second and third waves of the new coronavirus occur again in the Philippines, it is predicted that real estate prices in the Philippines will surely fall in the future.
Now I would like to explain in detail why the Philippines real estate prices are falling.
Why Real Estate Prices in the Philippines are Falling:
Remittance from overseas migrant workers (OFW) is reduced.
Due to Coronavirus, the number of foreigners, especially Chinese buyers, has dropped sharply.
On-line casino (POGO) Chinese employees are not gathering and shrinking, resulting in an increase in vacancies of commercial buildings and residential condominiums.
After the Lehman Brothers shock in 2008, real estate prices in the Philippines continued to grow after a temporary stagnation, and the price rose from about 2 to 3 times.
The real estate market in the Philippines has been steadily rising, supported by foreign investors, OFW, and online casinos (POGO) for several years.
Filipino overseas migrant workers (OFW) send money from abroad to the Philippines every year, and the total amount of remittances continues to increase by about 5% year-on-year, equivalent to about 10% of the Philippines' GDP. We send as much as 3 trillion yen per year. The funds remitted by OFW are not only used for consumption to improve the economy of the Philippines but also to purchase homes when OFW returns to the Philippines and to purchase real estate for the purpose of real estate investment. I will.
However, due to the pandemic of the new coronavirus, Filipino overseas migrant workers (OFW) are unemployed, and 100,000 workers have already returned home.
As a result, overseas remittances are expected to decline significantly, and we believe that real estate prices will temporarily decline due to the inability to pay mortgages and the decrease in new real estate purchases.
Due to the operation of the Philippine government that started in 2016, the online casino (POGO) is now licensed. With the launch of the officially licensed online casino (POGO) in the Philippines, hundreds of thousands of Chinese employees working there have come to work in the Philippines.
The demand for condominiums around the offices of online casinos increased sharply, all the vacant vacancies up to that point were fully occupied, and the rent market price rose sharply. This is because the demand for purchases at home and for use as employee dormitories has rapidly increased because the executives and staff of online casinos have become residents. In the vicinity of POGO alone, the demand could not be met, and the demand for real estate as a housing increased further to the surrounding area, contributing to the growth of real estate prices in the Philippines.
However, due to the pandemic of the new Coronavirus (global pandemic), entry of foreigners into the Philippines for commercial and tourism purposes has been restricted, and it is currently impossible to enter.
(As of May 28, 2020)
As a result, people who have returned to their home country before entry is restricted have been unable to return to the Philippines and are seeing cancellations of rented properties.
In addition, POGO itself cannot be operated at present, and it is expected that it will be reduced in the future for a while. POGO is said to occupy about 10% of office space in the central part of Metro Manila. I think the effects of this reduction will have a large impact, not only on increasing the vacancy of office space but, also on the condominium buying and selling market.