Nathan Andrada’s Blog

As I rode the bus along Ayala Avenue, I read the headline on the ticker tape screen in Insular Life Building saying the country’s property sector will endure the economic crisis. I tried to search on the Internet to see the full details of this news but I never found anything. Or maybe I am just not that good at searching.

But you see, I can not help but notice how many of the new high-rise residential condominiums built here in Manila especially in these last couple of years, are still unoccupied. Cement prices have also significantly dropped recently indicating slowdown in construction projects. Although the commercial space sector still continues to enjoy positive growth because of the foreign outsourcing companies, the residential property sector is becoming a huge question mark.

The property boom in the Philippines in the last few years saw property prices jump in astronomical levels. Buoyed up by speculative and foreign buying, property prices went up so high that many Filipino middle class families could no longer afford to own a home in the greater urban areas. Then the global financial and economic crisis struck out of nowhere, affecting most property sectors in most economies in Europe, the Middle East, and the Asia-Pacific region.

Now, the paradigm has shifted and property owners are forced to significantly lower price valuations in order to attract buyers. In many cases, these developers, which made their projects through loans from banks, will find themselves in a bind since they will be unable to meet their projected sales. The economic crisis has caused a decline in appetite for home purchases and for those who are willing, the credit crunch has made it difficult for people to obtain loans to finance their mortgages.

I am not sure how the property sector will survive the crisis without falling hard and eventually deal with consolidation. With tremendous supply of space and demand quickly drying up, the property sector here in the Philippines is going to need a massive shot in the arm in order to avoid an impending collapse.