Falling OFW remittances, rising unemployment to push down property prices in Philippines by 15 per cent
- Remittances from overseas Filipino workers, the main drivers of affordable and mid-income housing, are expected to drop by as much as US$6 billion this year
- Demand from mainland buyers and Chinese-operated online gaming companies is expected to fall due to the recession-induced slowdown
Home prices in the Philippines are likely to decline by up to 15 per cent after more than two decades of uninterrupted growth as a slowing economy due to the Covid-19 outbreak weighs on demand, with affordable and mid-income housing seen as the most vulnerable segments.
The twin blow of rising unemployment locally and job losses among Overseas Filipino Workers, and a slowdown in investment and hiring by Chinese-operated online gaming companies, known as Philippine Offshore Gaming Operators (Pogo), is likely to drag home prices lower this year, according to property consultancy Colliers.
“The last time we saw this level of correction was during the Asian financial crisis, in 1998 [and] 1999,” said Joey Bondoc, senior research manager for Philippines at Colliers. “This is probably worse than the global financial crisis, but not as bad as the Asian crisis, as the financial system is strong and interest rates are as low as they have ever been.”
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Remittances from overseas Filipino workers, who drive the demand for affordable and mid-income housing units that are priced between 1.7 million pesos (US$34,000) and 5.9 million pesos, are expected to drop by as much as US$6 billion this year as thousands of OFWs are likely to lose their jobs amid the deep global recession.
The Philippine economy contracted by 0.3 per cent in the first quarter, a 22-year low. The outlook for the rest of the year also looks bleak. Ratings agency Fitch expects the economy to contract by 1 per cent in 2020, noting that the forecast “is uncertain and subject to considerable downside risks depending on how the virus runs its course globally and domestically”.
In 2019, mainland Chinese buyers, including Pogos, accounted for between 20 per cent and 40 per cent of sales of developers Megaworld Corporation, SM Development Corporation (SMDC), and Primary Homes.
“Without new Pogo employees and investors that will buy or lease out completed condominium units, we are likely to see an increase in vacancy in the secondary residential market which covers condominium units completed and turned over to unit owners,” Bondoc said. “We also need to closely observe key economic indicators such as unemployment and OFW remittances.”