Philippines along with many SE Asian property industries are struggling to survive

[ASEAN NOW News]

For many years, over the long term, buying property has been seen as a good investment either for a quick profit or for long term growth.

 

However, now move forward to Q2 2021 and beyond, and there are very few brave investors out there, taking up the promotions from hard pressed developers to buy.

 

Of course, the pandemic is the main reason for the turmoil, and with over stock of condos and houses, it could be a long time before the realtors will see any significant rise in sales.

 

Across SE Asia the markets are naturally very slow. Here is a snapshot of four countries.

 

Philippines report

 

 

The Philippines' housing market is now struggling, amidst coronavirus-induced economic downturn.

 

The average price of 3-bedroom condominium units in Makati CBD plummeted by 16.11% during 2020, far worse than the previous year's 1.03% fall. ... Quarter-on-quarter, house prices in the CBD fell by 8.7% in Q4 2020.

 

Metro Manila home prices fell by ten percent in the first quarter, according to research from Bangko Sentral ng Pilipinas (BSP).

 

The lingering effects of the COVID-19 pandemic continue to drag down condominium prices in the National Capital Region which declined 12.8 percent from the same period last year.

 

The bank’s Residential Real Estate Price Index noted that this was the third straight quarter where Metro Manila home prices fell with the condominium sector responsible for most of the decline. Housing prices in all other sectors have risen across the board over the last six months.

 

Property outside of Metro Manila continues to perform a little better with home prices elsewhere in the Philippines rising by almost one percent. This was the seventh consecutive quarter of growth, although the housing and duplex sectors both recorded price declines. 

 

Vietnam

 

 

Vietnam's property market has been badly hit during the COVID-19 pandemic, with apartment prices in Ho Chi Minh City falling by 14.51% during 2020, in inflation-adjusted terms, in stark contrast to a whopping 69.47% house price rise in 2019. Quarter-on-quarter, house prices increased 1.93% in Q4 2020.

 

The existing supply remained at 2020 level which was 1,422,486 sqm NLA from 18 Grade A buildings and 68 Grade B buildings.

 

After the challenging year of 2020, the office market witnessed some signs of recovery in the first quarter of 2021, as shown in positive net absorption.

 

Total net absorption in the quarter was 19,655 sqn NLA, mostly from Grade A sectors, bringing the vacancy rate of Grade A sector down by 3.9 ppts q-o-q.

 

The average vacancy rate for Grade A sector was 14.2% and for Grade B sector was 9.0%. However, the vacancy rate level has not fully recovered to the pre-pandemic level and still was at 3.4 ppts and 3.3 ppts higher than last year’s level for Grade A sector and Grade B sector, respectively.

 

Based on transactions recorded by CBRE Vietnam, relocation and expansion accounted for 80% of the total number of transactions in Q1.

 

Unlike previous quarters, there was not any transaction from contraction. Most buildings with good accessibility and connection to the city centre, along with high management quality and building specifications, recorded an improvement in occupancy rate.

 

In terms of lease areas, the top three leading industries are Information Technology, Finance/Banking, and Insurances, together account for 60% of total lease areas. Logistics, Manufacturing, and Retail/E-commerce, despite smaller lease areas, have witnessed strong growth since 2018.

 

Thailand overview

 

 

Thailand had for the most part returned to normal by the end of 2020.

 

Bars, clubs, and restaurants were filling up, people were back at work, and domestic travel was gathering pace.

While international tourists were still absent, it was widely held that Thailand had escaped the worst of the pandemic and could avoid further outbreaks.

 

But with successive waves of the virus emerging and acute lack of available vaccines, confidence there is crumbling, and the Thai property market is feeling its worst chill yet since the pandemic began.

 

The market was already reeling last year. As travel bans and lockdowns curtailed showroom visits and viewings, sales offices closed, and new projects were stalled.

 

But in the months that followed an initial national shutdown in April and May 2020, faith was returning with Thailand emerging as a success story in its handling of the virus.

 

Widespread use of masks, a robust health system, and strict travel requirements appeared to be effective weapons in fighting the virus and avoiding harsh, full-scale lockdowns as seen in places like China and Europe.

 

Demand from both domestic and foreign buyers was showing signs of recovery, especially in low-rise housing popular with end-user buyers.

 

Developers had begun offering big discounts and promotions including free furniture, zero fees on ownership transfer, down payment-free periods for up to 24 months, and zero interest on down payments.

 

Discounts of even 20% were being offered on completed developments where developers wanted to clear their backlog.

 

So, the first and the second wave were door openers. There were significant discounts on the resale market, and developers with new stock had to adapt their prices and offering more incentives. It was a real buyer’s market.

 

But the onset of the third wave in March has sent the market back into reverse.

 

And now with nearly 10,000 new cases a day in July naturally buyers of landed properties are holding back as travelling around the country has been made difficult.

 

The Thai government has been forced to maintain a difficult balance between aggressive restrictions to curb the spread of the virus and keeping the economic wheels moving.

 

Thailand’s stuttering economy is already in a crisis position. The country lost more than THB2.1tn in tourism revenue last year, representing 13% of GDP.

 

Singapore

 

 

In Singapore, where a large percentage have been vaccinated, property market players ponder over potential cooling measures as private home prices increase in Q2 2021.  

 

According to flash figures recently revealed by the Urban Redevelopment Authority (URA), the overall residential price index actually jumped by 0.9 percent from the previous quarter, marking the market’s fifth consecutive quarterly rise.  

 

Mark Yip, chief executive officer of Huttons Asia, said that prices increased by 7.3 percent compared to Q2 2020, and property curbs “remain a possibility”.  

 

During the launch of the Monetary Authority of Singapore (MAS) annual report, managing director Ravi Menon mentioned that while the property market is not considered overheated at the moment, the implementation of such cooling measures would never be announced in advance. 

 

Yip said, “Cooling measures are likely to be targeted at a certain group of buyers, such as multiple homeowners with higher ABSD (additional buyer’s stamp duty) or lower LTV (loan-to-value) or couples who decide to buy multiple homes to encourage prudence.” 

 

In the past 30 years, the Singapore residential property prices had increased at half the pace of nominal GDP growth. In other words, the growth in residential property prices is supported by economic fundamentals. 

 

However, additional measures discouraged some developers from launching new projects, increasing demand for the resale market.

 

Demand is expected to remain resilient due to strong job creation, a “flood” of Housing Development Board (HDB) upgraders, and local and foreign investors looking for long-term rental income.   

 

Moreover, Tan Tee Khoon, country manager of PropertyGuru Singapore, said the quarter’s largest driver of prices was in the suburbs or outside central region, because of the performance of executive condominiums. 

 

“There is still a strong demand for affordable entry-level condos, likely fueled by the market of HDB upgraders whose flats recently fulfilled their Minimum Occupation Period (MOP) in 2020 and 2021,” added Dr. Tan. 

 

The flash estimates are compiled based on transaction prices given in contracts submitted for stamp duty payment, and data on units sold by developers up to mid-June. 

 

“Past data have shown that the difference between the quarterly price changes indicated by the flash estimates and the actual price changes could be significant when the change is small. The public is advised to interpret the flash estimates with caution,” the URA said in its press statement. 

 

The Future???????????

 

So, in conclusion, the markets across SE Asia are unable to really predict its own destiny, as everything depends on how quickly the region can vaccinate at least 70% of the population, before there is hope to bring the pandemic under control.

 

There are always investors holding cash that will be around to pick up some distressed bargains, however they will pick the markets that look like providing the safest return.

 

The 100-dollar question for them will be a. when do the think the markets have reached the bottom, and b. what city provides the best returns.