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Jul 12, 2020

Ayala Land sees real estate recovery riding on strength of PH economy

July 10, 2020 – Ayala Land Inc. is banking on the strength of the Philippine economy to help the real estate industry recover from the impacts of the COVID-19 pandemic.

In his opening remarks at a virtual forum held by the Makati Business Club on June 16, Ayala Land President and CEO Bobby O. Dy noted how the country is well positioned to recover from the crisis given its stable macroeconomic fundamentals.

“Low interest rates, low inflation rate, and stable exchange rates—these factors are conducive for investments,” Dy said.

The country’s fiscal position also remains strong. Recently, a ranking published by The Economist magazine placed the Philippines sixth out of 66 emerging economies to be in the best position to weather the crisis. The ranking was based on four factors: public debt, foreign debt, cost of borrowing, and reserve cover.

For the property industry, each sector is bound to see different stages of recovery. Dy highlighted that Ayala Land’s office and warehouse logistics units continue to operate without significant effects, while others are seeing different results.

Ayala Land is seeing encouraging signs in its residential business, which recorded increasing sales from April to May and again from May to June while the enhanced community quarantine was in effect.

“We’re seeing a pick-up in activity in residential sales as early as now. We hope that positive trend will continue,” Dy said.

The company’s mall business has especially been affected due to the implementation of quarantine measures since March, prompting consumers to stay at home except for essential needs.

The lockdown measures have also heavily affected the company’s hotel and resorts segment, which Dy expects to recover only when people are once again free to travel.

Amid these impacts, Dy argued that the property industry remains to be one of the best investment options in the country. He cited the growth of property prices in Ayala Alabang, which started at P230 per square meter in 1978 and has since grown to about P100,000 to P110,000 per sqm today, showing a compounded annual growth rate (CAGR) of 16% to 17%. Meanwhile, the company’s flagship eco-community in Laguna, Nuvali, has seen a 10% CAGR in property values over the last 10 years.

“If you look at long term trends of property, taking into account various economic cycles, I believe property continues to be one of the best, if not the best, performing asset class,” Dy said.

The executive noted that Ayala Land has yet to see a meaningful price correction during the pandemic. Should there be any, the company does not expect a repeat of price reductions seen during the Asian Financial Crisis.

In addition, the country’s historically low interest rates should keep asset prices stable, while there remains to be ample liquidity in the market in search for investment options.

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