Disruptions to working arrangements are beginning to flow on to the Philippine property market, where guest workers in particular generate strong office and home sales, according to Maybank Kim Eng.
The report noted in particular that the exit of Chinese workers employed by Philippine Offshore Gaming Operators has had a huge impact on the residential property market.
“While there is no official data on foreign purchases, data by Ayala Land, Inc. the country’s largest land developer, showed a steep 60% plunge in sales reservations by foreigners, especially from China.
The foreign share of total purchases fell to 10.9% in 2020 (vs. 15.2% in 2019) while purchases by local and overseas Filipinos increased,” the report said.
Among Filipinos, the pandemic also triggered a change in residential preference due to work from home arrangements adopted during the pandemic, Maybank said.
“The out-migration reallocated real estate demand — dubbed the ‘doughnut effect’ — towards the suburbs and away from the city center,” it said.
Metro Manila home prices contracted 4.8% year on year in the fourth quarter, according to the Bangko Sentral ng Pilipinas. Meanwhile, residential property prices in the provinces rose 5.9% in the three months to December.
“Provincial cities with close proximity to Metro Manila have been seeing a surge in interest among property seekers, fueled partly by lower population levels, fewer COVID-19 cases and relaxed lockdowns,” it said.
Meanwhile, Maybank also noted that the shock to the migration market is being seen most prominently in the repatriation of overseas Filipino workers (OFWs).
“The return of OFWs may have contributed to the increase in unemployment which spiked to the highest in ASEAN at 17.6% in the second quarter of 2020,” it said.
Labor Secretary Silvestre H. Bello III said in April that 19% or more than 647,000 of the 3.5 million documented OFWs have been repatriated due to the pandemic. There are 8.8 million OFWs, including 3.8 million migrants, according to June 2020 government data.
Despite the repatriations, cash remittances to the Philippines dropped by only 0.8% to $29.903 billion in 2020. This represented the lowest contraction in the ASEAN, though Thailand was the outlier with remittance growth of 0.3%, Maybank said, citing official data from ASEAN governments.
“This could be due to overseas workers sending more remittances home to their families when their countries of origin experience economic hardship, or sending back more of their savings ahead of their decision to move back home,” Maybank said.
The central bank expects cash remittances to grow 4% this year, driven by prospects of an economic recovery.