The real estate industry was among those severely hit by the Covid-19 pandemic. Quarantine measures and uncertainties were major factors for the slump in both commercial and residential property sector last 2020. Based on recent economic figures from the ADB and BSP we are looking at a slow economic recovery for 2021. These projections include a growth of 6.5% in GDP and 5.3% employment outlook index. Things are also expected to look up in the residential real estate sector which is a good sign for those who want to buy a new house.
BSP’s Residential Real Estate Price Index (RREPI) for the second quarter of 2020 indicated a growth of 27.1% in prices of new housing units. However, there was a decline of 0.4% on year-on-year figures from 3Q 2019 to 3Q 2020. Despite the 3Q decline BSP expects a strong rebound for real estate in 2021 with a projected growth of 7.8%. Other factors that promote optimism in the real estate market include the vaccine roll-out and initiatives to slowly re-open the economy. As people adjust to the new normal, plans for the future are also being realigned. It is only prudent to explore investment opportunities in the real estate sector for solutions to the current and future housing needs for the family.
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Two Reasons to Invest in Residential Real Estate in 2021
Offhand I can think of two reasons to invest in residential real estate in 2021. The first is the potential for growth and another is the low interest rates on loans. Buy low – sell high is a basic principle in investment, if you are looking for properties at low prices then you are likely to find them in the secondary market.
Aside from foreclosures, you can also find properties sold at a more flexible or negotiable rate from owners who opt to dispose their assets to maintain liquidity. Property developers are also projecting growth in land prices after the pandemic just like what happened after the 2008 financial crisis. If this holds true then you stand to make a profit from the future value of the property purchased today.
Another factor that makes residential properties more affordable at this time is the low interest rates set by the BSP for 2021. The reduction of interest rates eases the budget concerns of low and middle-income earners who plan to buy a new home. This decrease in interest translates to reduction of monthly mortgage payment. This also opens the option of remortgaging to acquire a second house. Developers of townhouses and condominium units may also be more flexible with their terms given the record low rates. Low interest rates coupled with lower prices at the secondary market provide the low and middle-income earners with a better chance to afford their dream houses.
What Type of Real Property Should I Invest In
The next question to ask is what type of property should I invest in? Residential real estate is a solid investment even amidst a covid-19 pandemic. If anything, the pandemic merely changed one’s criteria in choosing a house. Proximity to the work-place and property size has become a major consideration for would be homeowners. The lack of transportation during the lockdowns emphasizes the value of proximity to the workplace, school, retail establishments, etc.
Work-from-home and distance learning also made people realize that they’d be needing more space to accommodate a home office. Data from Lamudi indicate an expected increase in demand for land properties. Interest in condominiums and foreclosed properties are also expected to rise. However, the type of property you choose should be aligned with you needs and your future plans.
In terms of location, Quezon City and Cebu were named as property hotspots in 2020. Other cities that made the list include Makati, Pasig, Taguig, Manila, Davao, Bacoor, Antipolo, Angles, and Baguio. Residential real estate in Metro Manila and Central Business Districts remain to be popular but a gradual shift of interest towards properties in less densely populated areas. Another good location to look into are potential boom areas in Metro Manila and key provinces across the country.
Finding a Residential Real Estate Property
Finding a residential real estate property that you can invest in is not that hard under the new normal. Digital real estate platforms like Lamudi make it easier to scout for properties without leaving the house. There are also real estate developer websites that feature digital viewing of units that you are interested in. For financing concerns, property seekers can simply access a mortgage calculator online to assess how much amortization they could afford.
A positive industry outlook, lower prices at the secondary market, and low interest rates for loans are all pluses for real estate investment at this time. It’s up to you if you’re going to grab it or let it slide for now.
Image 1 from Tierra Mallorca on Unsplash
Image 2 from Gabby K on Unsplash
