LIQUIDITY SQUEEZE

Reports are out on the long-awaited GCash IPO.

GCash is preparing what could become THE LARGEST IPO in PH history, with reports saying it may raise as much as P92 Bn.

So what does this have to do with real estate (RE)? And why is this a horror story?

Because in the world of investments, RE and the GCash IPO are competing for the same wallet.

Years ago, fresh from the banking sector, I had a long argument with a colleague about RE as an investment.

This was around 2015. Stocks were performing well. Fixed income products were easier to compare. Meanwhile, many rental yields in Metro Manila looked weak once you properly considered friction costs.

My point was simple:

If a person is buying RE for investment returns, then RE should be compared with other investments.

Stocks. Bonds. Time deposits.

My colleague disagreed. He said RE was different. And to some extent, he was right.

RE can be an end-use purchase. In those cases, it has utility.

But once the sales pitch uses the word “investment,” the rules change.

The moment a condo is marketed as an investment, it enters the same mental basket as every other place where capital can go.

True, investors may set specific limits for their asset allocation, such as 10% of net worth in real estate and 40% in bonds.

But as asset prices move and opportunities change, those weights can shift.

So real estate is still competing with other investment outlets for the same pool of capital.

And that is where the GCash IPO becomes relevant.

The RE market is already dealing with weaker liquidity. Buyers are more cautious. Investors are more selective.

Now imagine one of the most anticipated IPOs in the country entering the picture.

A P92 Bn IPO will absorb liquidity.

It absorbs the remaining “investment budget” of people still willing to deploy capital.

That does not mean RE is dead.

But it does mean RE is competing for a smaller and more cautious pool of investment money.

And in a market with dwindling liquidity, every peso that goes somewhere else is a peso RE has to fight harder to win.

A “good” RE deal must now compete with every other “good” investment opportunity.