Residential Real Estate Prices Grew YOY in Q3 2021

Property prices finally rebounded in the third quarter after slumping for two straight quarters, buoyed by the sharp increase in the prices of condominium units and townhouses as demand heightened amid the continued reopening of the economy.

The Bangko Sentral ng Pilipinas (BSP) said the Residential Real Estate Price Index (RREPI) increased by 6.3 percent to 139.5 in the third quarter from 131.2 in the same quarter last year.

This reversed 0.4 percent and 9.4 percent declines in the first and second quarters, respectively. The RREPI, launched in the first quarter of 2016, is used as an indicator for assessing the real estate and credit market conditions in the country.

“The nationwide house prices increased by 6.3 percent year-on-year partly due to the stronger consumer demand for residential property, particularly townhouses and condominium units,” the central bank said.

The increase, according to the BSP, is consistent with the outcome of the third quarter 2021 Consumer Expectations Survey (CES) that showed a higher percentage of consumers preferring to buy real estate in the reference quarter amid signs of economic recovery.

The central bank attributed the pickup in nationwide housing prices to the 11.4 percent rise in the index of residential property prices in the National Capital Region (NCR) to 153 in the third quarter from 137.3 in the same quarter last year.

“The considerable uptick in the NCR residential property prices was brought about by the rise in the prices of townhouse and condominium units, which outweighed the decline in the prices of single detached/attached houses in the NCR,” the BSP said.

Housing prices in the NCR slumped for four straight quarters year-on-year since the fourth quarter of 2020 due to lower demand as families migrated to the provinces and areas outside the capital to escape the strict lockdown and quarantine measures amid rising COVID-19 infections.

With the accelerated vaccine rollout as well as declining COVID-19 cases, families are slowly returning to the capital as some of them are now reporting for work in their offices while some students also resumed face-to-face classes.

On the other hand, residential real estate prices in areas outside NCR have been rising since the third quarter of 2019 before contracting slightly by 0.6 percent in the second quarter of this year.

In the third quarter, the BSP said property prices in areas outside NCR also increased by 4.9 percent to 133.3 from 127.1.

The BSP said the number of real estate loans granted for all types of new housing units in the country jumped by 51.1 percent in the third quarter of the year. The purchase of new housing units accounted for 84.7 percent of the real estate loans.

Most of the loans granted in NCR were used to purchase condo units while loans granted in the provinces involved the acquisition of single-detached or attached houses last year.

More than a third of the real estate loans were disbursed in NCR followed by Calabarzon with 28.5 percent, Central Luzon with 13 percent, Central Visayas with five percent and Western Visayas with 4.7 percent.

Source: BSP

CBRE: Asia Pacific Figures Q3 2021

Office: While regional Grade A net absorption increased by 28% q-o-q to reach 13.7 million sq. ft., leasing volume remains some way below pre-pandemic levels. Leasing activity was dominated by relocations as occupiers capitalized on cheaper rents. Tech and finance remained the primary sources of demand.

Retail: Although leasing sentiment gradually improved this quarter, many retailers have pushed back their expansionary plans to 2022. The F&B sector continues to dominate leasing activity. Selected luxury retailers were seen exploring upgrading opportunities in a few North Asian markets.

Logistics: Despite disruption to manufacturing and container shipping, strong requirements for safety inventory and omni-channel distribution ensured overall logistics demand remained resilient. Asia net absorption reached a record high 27.4 million sq. ft..

Investment: While investment turnover fell 21% q-o-q to US$32 billion, this figure was still 21% higher than the same period of 2020 and is close to 2019’s quarterly average. REITs, property funds and property companies were among the major buyers this quarter.

Q3 2021 APAC Figures_FINAL

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Source: CBRE

Millennials: The Next Super Investors

Millennials are now a force to be reckoned with in the property market, and despite the economic slowdown due to the pandemic, their interest in real estate investing is growing.

Snapshot: Excerpt from recent CBRE report into Asia Pacific Millennials

Who are these millennials, also known as the Generation Y segment? They were born between 1981 and 1996. According to a Statista survey, 70 percent of the global workforce last year was comprised equally by Gen X (born between 1965 and 1980 ) and Gen Y. Forecasts however suggest that the Gen Z (born between 1996 and 2015) will make up nearly a quarter of the workforce as they start to enter adulthood.

According to an article written by online newsletter Brink, “one-fourth of the Asia-Pacific workforce is made up of millennials, representing an estimated $1.1 trillion in buying power in 2020, making this demographic one of the most important consumer bases in the region”.

Similar socio-economic mindset

In the Philippines, most millennials are fully employed. Typically, the younger set occupies supervisory to middle level-income jobs, while the older ones are ensconced in the senior manager level category (director or vice president position).

Many of them are still single and reside with their parents but for the unmarried 30-something millennial, independent city living has become an aspiration.

Millennials are a diverse group but they all share similar socio-economic mindsets when it comes to homebuying. The elder millennials are well into adulthood.

On average, a big chunk (more than 70 percent) of my MBA students at the Ateneo Graduate School of Business are millennials. They are financially prudent and half of this segment have expressed their desire to eventually invest in a home. Many are still single but they are saving money so they can purchase their dream condo that’s conveniently closer to their places of work.

If Gen X has the three C’s (cash, condo and club membership), Gen Y is bent on having the two C’s (cash and condo), especially with pre-developed home prices and terms of payment practically within reach.

Admittedly, the surge in demand for residential purchases for more than a decade was disrupted by the pandemic and despite soaring unemployment that peaked in the fourth quarter of 2020, middle and senior level Gen Y executives are still optimistic about their long-term future.

Influencing the purchase decision

A digital-first generation, millennials rely heavily on social media to share content with their peers, promote the things they adore and get closer and personal with their favorite brands.

For property developers wanting to influence the purchase decisions of a millennial audience, social media provides you with limitless opportunities to do just that.

Millennials coming from a middle-income family tend to get a helping hand from parents eager to make sure that their children are secured with their first ever major investment—the purchase of real estate.

This practice of parents providing financial support and credit guarantees so their adult child can finally purchase a condo unit represents more than 60 percent of all homebuying purchases.

A typical millennial would usually shell out anywhere from P3 million to P7 million and their preferred locations in Metro Manila would be Makati, Bonifacio Global City, Taguig and Ortigas.

For Cebu, the hands-down favorites are the Ayala developments at the IT Park. In Iloilo, the preferred destination is the Megaworld township development, Iloilo Business Park.

‘Superior investors’

But developers must take note that there is also a category of high-net-worth (HNW) millennials coming from second generation business families or successful startup entrepreneurs and investors who have made a fortune and can now afford to invest and venture in high ticket properties.

We refer to them as super investors and they are savvy in many respects with excess money to spare for as long as these real estate purchases ranging from P10 million to P80 million would provide attractive yields.

This segment is something developers should cast an eye on. Pre-pandemic sales of condominiums were primarily driven by overseas millennials coming from China and these pent up demand fueled price surges in the Bay Area traversing the cities of Parañaque, Pasay and all the way to Manila.

With the slowdown of overseas investors, developers must now creatively establish a solid plan to lure this local yet powerful segment.

The real challenge for developers is all about creating a powerful differentiation on their products.

To shift the share of mind to share of heart to share of wallet, products must be compellingly and emotionally different.

Source: Inquirer.net