As the coronavirus outbreak halts the usual operations of real estate businesses, several professionals find themselves coping with the new normal. It comes with a lot of uncertainty, giving rise to a range of questions concerning how to keep the business afloat and offer value-added services to clients.
Since the start of the community quarantine, Lamudi has been keeping track of these concerns, shedding light on them through different webinar series, Surviving Broker Business in the time of COVID, Lamudi Academy Live Sessions, and Strategizing Real Estate Marketing: An Industry Response to COVID-19. Taking this up a notch further, Lamudi hopes to focus solely on questions brokers have during this health crisis by launching a new series called Lamudi Broker Central: You Ask, Experts Answer.
In its first episode, Carl Dy, President of Spectrum Properties, responds to queries buyers and investors commonly raise in this period of community quarantine and beyond. Here are some of the insights he shared:
Do I Have to Pay Rent? Do I Have to Collect Rent?
Dy said that as long as you stay in the unit and the contract is active, you’re obliged to settle your rental fee. However, he noted that there are grace periods available for tenants who are not able to pay their dues. “There are grace periods that are given right now, [in] which you can delay your payment from today to, say, after 30 days. You can also divide your payments behind to the next six months,” he said. For landlords, Dy noted that collection of fees forms part of your obligation, and therefore should be done.
If I Cancel My Purchase, Do I Get a Refund?
Some property buyers may be wary of pushing through with transactions given the uncertainty of the crisis. For one, they’re not sure if they can hold up monthly payments in the future. At the same time, they would want to hold on to their cash now as much as they can, at least until the outbreak is over. To this, Dy advised people who have ongoing payments with a developer, “First, avail of the grace period. This will buy you time. Two, there’s the Maceda law. It states that if your installment is more than two years, you’ll get two months of grace period.
“So, a grace period from the ECQ and two more months from the Maceda law would give you three months to think this through. If after three months, you still want to cancel, the Maceda law states that if you have gone through two years of installment, you will get 50 percent of what you paid for as a refund.”
For those who were able to pay less than two years, however, there will never be a refund, according to the law. Only a grace period will be given to allow dwellers to sell the property and let the new owner assume the balance. This is why Dy advises to touch base with people who might be interested in getting a property at cost or below market value.
What If I Cannot Pay My Bank Loan Anymore?
In contrast to installments with developers, payments in banks don’t have a refund policy, Dy said. That said, you’re obligated to settle your account regardless. Another option is to sell the property.
Dy shared a few tips on how you can analyze your situation, “There’s what you call the VAR or Value at Risk, meaning, how much you shelled out for this property. For example, you’ve shelled out two million with the developer, and another 1.5 million with the bank, so the total VAR is 3.5 million. That’s the potential amount you’re going to lose if you cancel your installment with the bank.”
Sharing that they have a bayanihan sale property project, Dy said that they’re compiling a list of sellers who want to liquidate during this time. It’s an assistance initiative aimed to keep properties from being taken by banks. Property owners can maximize this opportunity to get at least a portion of their investment back.
For Those Reconsidering Their Property Purchase, Do You Recommend a Dacion En Pago from Their Bank?
Dacion en pago means returning the property to the lender as the latter dismisses mortgage debt. When you’re not able to find a buyer for your property, Dy said that dacion en pago is a better option in terms of cutting down losses than hiding from the bank. He, however, reiterated the importance of maximizing the grace period or selling the property. He likewise advised talking to loan officers on viable financial solutions.
How Can I Best Make Use of the Grace Period Under the Maceda Law?
According to Dy, the Maceda Law says that for every year of installment, you get one month of grace period. Since cash is king during a crisis, allowing people to satisfy basic needs, Dy recommends maximizing this benefit. With an extension in your payments, he noted, “You can hold onto your cash until things are more certain.”
Do You Think These Trends in the Luxury or Affordable Market will Carry Over After the ECQ?
Since the lockdown has only been more than a month, Dy noted that there aren’t significant trends yet in the property market. “People are still not really doing anything. Maybe internally, they’re worrying, but it’s not yet going out to the market,” he said.
He, however, projects that property owners would want to be more liquid than go heavy on assets in the next few days and months. He said, “Definitely, we will see people starting to sell their properties.”
He added, “We’re also seeing that Airbnb, the rental market, is lessening. Owners will not have tenants for their unit, and this will greatly affect their behavior.”
“From an affordable market point of view, there will be two types of middle-market response, one will be ‘I’m financially okay. My work is still on-going. I’m gonna hold on to it,’ but there will be a certain group wherein they’ll say, “I’m financially worried. I don’t think I can sustain this. I need to liquidate. I need to stop my bleeding. I want to sell,” he noted.
Dy sees similar patterns in the buying sentiments of the high-end market. “What we’re seeing is, you have two types of high-end owners. One is, ‘I’m not affected [by] whatever’s happening in the market now. In fact, I’m financially okay, I want to buy.’ The buying will probably start rolling, two or three months down the road.
“And then you have the high-end market who say, ‘I over-leveraged. I borrowed too much. My business is going to be affected. I’m going to liquidate some of my properties,’ he noted.
Dy likewise projected that the changes in property prices will happen in the secondary market, with owners seizing the opportunity to sell below market value.
What Will Be the New Norm for Real Estate in the Philippines?
Noting that the quarantine has been in place for only over a month, Dy estimates that the new norm will manifest two to three months down the road. He, however, identified some opportunities now. “Because of the growth of the community market through Viber or Facebook, we’re seeing wholesalers wanting distribution points inside the city.” This presents promising business if you’re into warehousing inside the city.
“We’re also seeing a trend of people reconsidering living a bit far from Metro Manila,” he added. With the community quarantine prompting the work-from-home arrangement, some professionals discover that the set-up can work for them even after the lockdown.
Dy mentioned possible changes in retail as well. “Those companies who are solely mall-based will definitely think of an outside-the-mall, by-the-street strategy. So if your restaurants are all inside the mall, you are now considering putting up at least one major commissary by the street, so you’re accessible by customers even if the mall closes down,” he noted.
While the coronavirus pandemic has thrown a lot of uncertainty in the real estate industry, you’re not in a confusing haze completely. Just ask, and experts will answer. Stay updated on the next episode of Broker Central here.
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