Why the Pandemic Offers a Golden Opportunity to Invest in Real Estate

Although the pandemic has halted most, if not all, real estate activities, experts have been optimistic and confident that the industry can bounce back fast. In fact, even prior to seeing a recovery and complete resumption of operations, several have been echoing the fact that there are promising opportunities now in the midst of the health crisis. 

In the latest Lamudi webinar series, Deborah Ong, Lamudi’s Head of Corporate Affairs, talks about such potential with two of the finest thought leaders in the property industry: Lee Chee Hoe, Chief Representative of Hongkong Land Philippines, and Arch. Henry L. Yap, Business Unit General Manager of Robinsons Land Corporation (RLC) and President of RHK Land Corporation. 

Here are some of the notable insights from their discussion:

Collaboration between Property Giants

The two real estate companies, Hongkong Land and Robinsons Land, have teamed up in developing high-quality estates in the country for the continued advancement of the industry. Ultimately, the joint venture, named RHK Land Corporation, aims to serve more property seekers.

“We want to project in the Philippines the need for creating better markets with better types of developers, and thus we found Hongkong Land to be that partner, to kickstart our project in our newest destination estate called Bridgetowne,” Yap shared.

Calling Hongkong Land a responsive and cooperative partner, Yap noted that the projects under RHK Land Corporation, the joint venture of the two companies, are very successful.

The first development they undertook was the luxury condominium Velaris Residences, located in RLC’s new estate destination called Bridgetowne within Pasig City.

“This estate development will basically house residential, commercial, office, and educational facilities. This will be a new township that will be very close to the current CBD (central business district) here at the Ortigas Center,” Yap said.

Lee agrees with Yap that the collaboration is a powerhouse partnership. For Hongkong Land’s part, Lee said, “We like to bring this type of design excellence to the project. The experience and vision that we share together with Robinsons Land is a masterpiece we’re creating here in Velaris Residences.”

The collaborative project of the two property giants makes for a great investment, given the quality of the build and reputation of the developers.

The Good in the Bad

Asserting that crises can bring out opportunities, Lee enumerated the advantages of investing now in the midst of the pandemic. “It is [now] a better time to reassess investment portfolio, as interest rates are coming down in most of the countries,” he said.

“Real estate has become a good investment vehicle tool for you to protect the value [of money]. Over the years, the real estate value has always been increasing. With the Philippines’ economy, it has been growing for the past many years. The real estate industry is very strong, supported by developers that are very experienced,” he added.

Convinced that real estate investments withstand time, Lee pointed out, “If you look into the property market in the Philippines, the value has gone up tremendously for the past three to five years. It didn’t just hedge against inflation but it also [provided] good returns for investors whether they’re looking for capital appreciation or yield in terms of rental income.”

The best time to invest in property is during a downturn, according to Yap. Developers offer better payment options and terms in response to a crisis. In the case of Velaris, this comes in the form of stretched downpayment terms. “Knowing the sentiment of many of our investors, we have made the payment of the downpayment longer than it was before. This is to allow them to manage their cash,” he said.

He added that investors can use their unused cash to fund promising assets: “Adjust your requirements based on what you have not spent in the last few months. All this unspent leisure money that you normally would be using, you can actually redirect them into real estate because you know that it will be stable.”

Alluding to previous global emergencies, such as the Asian financial crisis, Yap mentioned that the rebound in the real estate industry has always been very strong. The dips in prices recover as soon as the economy stabilizes.

Yap agrees with Lee about the opportunities in the reduced interest rates. “Using a lower cost of money will yield better IRR (internal rate of return) in the future,” he said. If ever investors decide to sell the property later on, the appreciation offers a higher yield.

Reassurance for Concerned Investors

Although investing in properties is a wise move during the pandemic, there are some who are hesitant to take the plunge, especially because of the economic uncertainty. To this, Lee offered simple advice: be careful in choosing projects. 

This is possible by looking at the profile of developers they’re working with, particularly paying attention to track record. He urged engaging in due diligence: “Make sure that you find a project that will deliver on its promises.”

“Shop for a good project that gives better value in terms of design, finishes, and deliverables,” he added.

Speaking of excellent track record, Hongkong Land has been in the business for over 130 years. “We are invested in Hongkong where we hold a lot of offices in the central island. We also have investments in China, from development properties to malls,” Lee shared. The company likewise has assets in Southeast Asian countries, such as Thailand, Vietnam, Malaysia, Singapore, and Indonesia.

In the Philippines, Hongkong Land is known to be the brilliant developer behind One Roxas Triangle and Two Roxas Triangle in Makati, as well as the soon-to-be-completed Mandani Bay in Cebu.

“Hongkong Land is committed to bringing world-class products to the Philippines,” Lee emphasized.

For Yap, Lee’s advice to look at the reputation of a property developer before investing is highly important. One of the big challenges for real estate firms during crises is funds running empty. With the sale of units slowing down, it’s likely that the company won’t be able to complete projects, Yap explained. 

“As a big developer, like RLC and Hongkong Land, we have the muscle to provide the funds we generated from different businesses. We can ensure continuity of the construction of the project,” he asserted. The continuity extends to servicing clients. This, Yap reiterated, should compel investors to really pay attention to the reputation and track record of the developer.

Increase in Property Values

Another sense of reassurance for people investing in the time of COVID-19 is the constant appreciation of property values. Yap said that in the acquisition of a piece of real estate alone, with pre-selling units sold at a lower price, and then steadily climbing as the completion of the project nears, investors can already see appreciation.

Another factor that pulls up property values is the location. This is why Yap urged people to look for a unit in a “greenfield area.” He said, “Just as your building appreciates in prices, the value of the properties around the township also increases, pushing further the value of your specific unit. As you know, the value of your unit includes your own, plus the community around it.”

Pointing out the value in investing early, Yap shared that there are far better, “softer” terms when buying properties in advance. Over time, investors will see appreciation.

For Lee, the quality of the property dictates the increase in value as well. This is why he encourages buyers to look beyond the aesthetics and inspect the details of a unit. “Look into the internal space planning of a condo to make sure that it’s practical and comfortable for you to stay in the long run.”

He added considering how the project would take care of the dwellers’ future, in terms of well-being and amenities, as these likewise can determine the long-lasting quality of the property.

Pandemic’s Impact on the Real Estate Industry

It’s the hospitality and retail real estate sector that was deeply affected by the health crisis, according to Yap. The slowdown in tourism and the closing of malls have disrupted operations. But in the residential real estate segment, Yap sees a change in market preference

“Now more than ever, people realize that they have to be picky or choosy when they want to buy or invest in a home. The lockdown put them in these homes, so now they wanted to make sure that [they will] be more productive in their homes. In Velaris, we made sure, through the help of our partner, that this will be possible,” he noted.

Despite the slowdown in take-up today, Yap is optimistic that buyers will be confident to shop again when the economy recovers at the latter part of the year.

Another thing he observed emerging from the pandemic is people’s desire to place their hard-earned money into less risky assets. “I foresee that people will be afraid to put their money in stocks because of the volatility,” he said. He added, “Putting your unspent money in real estate will naturally be the best choice at this time.” 

With consumption improvement and potential rental income growth, real estate investors can see promising results.

Lee echoes Yap’s insights, especially the shifting preference in where to put money. He said that people will be more conscious of where the assets are best protected. 

But more than that, he noted that there’s a change in buyers’ priorities in actual property requirements. There’s greater emphasis now on space among home buyers. People aren’t only looking for a convenient, comfortable property. “This crisis has brought us to an [appreciation] of the space we want to live in. [People are] looking for a condo that gives a lot of other amenities and facilities, and privacy and safety,” Lee said.

In Velaris, future residents can take advantage of exactly that. Lee noted, “It’s not just the condo itself that gives [dwellers] a host of facilities. All the surrounding areas, you can access, from commercial offices to parks. These are all part and parcel of a master plan that they can enjoy.”

Another shift Lee observed during this crisis is in the tools being used. Online technologies have become commonplace in real estate transactions during the pandemic. Lee emphasized, “This trend has never been realized until this pandemic.”

“People are still buying. That has never happened before, as aggressive as during this crisis,” he added. 

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