By Amy Remo
December 8, 2018

It gets to that point where it’s almost hard to believe that optimism reigns strongly in the Philippine real estate industry.

The last several years saw only the stellar performance of an industry fueled by rising demand from across different segments and by new emerging growth drivers, and driven primarily by a consistently robust Philippine economy. And it’s the same old news every single year that some naysayers—in the belief that the industry is highly cyclical and susceptible to crashes—fear that the other end of this growth spectrum is already looming.

We foresee more companies with land bank diversifying from their core business and into real estate.

It gets to that point where it’s almost hard to believe that optimism reigns strongly in the Philippine real estate industry.

The last several years saw only the stellar performance of an industry fueled by rising demand from across different segments and by new emerging growth drivers, and driven primarily by a consistently robust Philippine economy. And it’s the same old news every single year that some naysayers—in the belief that the industry is highly cyclical and susceptible to crashes—fear that the other end of this growth spectrum is already looming.

Four property consultancy firms polled by Inquirer Property, however, beg to differ.

According to these firms, emerging trends in flexible workspaces, dormitories, offshore gaming, e-commerce, logistics and warehousing, as well as the influx of Chinese tourists and workers are expected to heavily influence the demand for spaces—be it for the residential, commercial, office or industrial segment.

Despite some headwinds and concerns of overheating, consultancy firms believe the Philippine property industry will remain resilient as demand continues to be supported by an underserved growing middle class, increasing purchasing power, and an ever growing demand from companies either setting up shop or expanding. Add to that the government’s aggressive infrastructure initiative and decentralization thrust, which are expected to unlock the potential value of land in key areas across the country.

For these consultancy firms, all signs indicate that the Philippine real estate industry is still in a sweet spot and industry players are all expected to continue full speed ahead to cash in on all the prospective growth opportunities that can be tapped.

Perhaps, there’s really no reason to doubt this bullish outlook and strong optimism for the industry. Here are excerpts of the views shared with Inquirer Property by Colliers International Philippines, Pronove Tai International Property Consultants, Jones Lang Lasalle and Pinnacle Real Estate Consulting Services Inc.

Real demand boosting property sector
PINNACLE REAL ESTATE CONSULTING SERVICES INC.

We’re seeing a lot of movement in provincial areas, especially Cebu, Davao, Iloilo and Bacolod, and to a lesser degree, popular tourist spots like Siargao, Palawan, La Union, and Bohol. A lot of our clients are looking for large developable land, especially those suitable for resort or leisure developments.

The warehousing sector is also on an uptick which we believe is a direct impact of the e-commerce industry. The availability of skilled laborers and the cost of doing business in the country are still relatively lower compared to our Asian neighbors. Interest is mostly concentrated in the south (Laguna, Batangas and Cavite) and Central Luzon (Pampanga and Bulacan).

Similarly, Metro Manila’s residential leasing sector is buoyant, thanks to the expat market. However, the landscape is now vastly different from a few years ago. While before, the demand is coming from expats employed by the BPO sector, most are now coming from employees of the POGO industry, most of whom are Chinese nationals. Mid-range condos and houses for lease are more popular in this market, most notably those to be used as staff housing.

The POGO market also continues to drive the office and retail spaces in the Bay Area. Most of the POGO operators are Chinese entities. It is a lessor’s or seller’s market when it comes to them as they are willing to pay any amount to get spaces for their operations and employees.

Co-working spaces are likewise picking up pace. Initially, these spaces are in Metro Manila but they have since expanded in key cities in Visayas and Mindanao. These spaces primarily cater to individuals and SMEs who want flexibility in working periods in an open office environment at reasonable rent. Some of these co-working spaces have opened their doors to students preparing for board exams or doing their research or thesis.

The retail sector is buoyant too—but not in a way similar to what we’ve seen years ago, due to increasing competition from the e-commerce sector. Today’s malls are now vastly different, with many focusing on offering experience and convenience. Innovative shopping centers now incorporate value-added elements including live performances, trade shows, arts centers, sports centers, and even farmers’ markets—elements one would not find on e-commerce websites.

Meanwhile, property developers are going north of Metro Manila, making Central Luzon a prospective investment hotspot. There’s the 177-ha Clark Global City, which is being developed by Udenna Corp. as the latest business hub of the country, as well as the 9,450-ha New Clark City with Phase1A comprising the National Government Administrative Center to be delivered by 2022.

The current exuberance seen in the real estate sector is further driven by the government’s massive spending on infrastructure—evident in the growing interest in areas close to where such projects are currently underway. One example is Commonwealth Avenue, where the MRT7 is under construction.  Firms that have land bank in the said area are reportedly now looking to develop residential projects.

The influx of foreign tourists and investors, specifically the Chinese, would also play a big role in boosting the real estate industry. However, proper safeguards should be in place to make sure that prices would not significantly shoot up, affecting the local end users and industry in general.

The Philippines has been historically resilient to external shocks, thanks largely to fiscal conservatism, and we expect this to continue. The residential market is driven primarily by end-users and not speculators, which should cushion the market from shocks or capital flight.

The weak peso also boosted the OFWs’ spending power, and many of them are now starting to buy real estate for the first time. In fact, an article published in the South China Morning Post reported that Hong Kong-based buyers now account for 8 percent of SM Development Corp.’s international sales. It should be noted that there are approximately 150,000 OFWs in Hong Kong, based on available data from the Philippine Statistical Authority.

We’re thus confident that the market is not overheating. There might be some corrections along the way but these scenarios are mostly temporary. As mentioned, the Philippines has historically been fiscally conservative. The prevailing interest rate is at 4.75 percent, the highest since 2009. The housing market is also largely driven by end-users, which in turn is real demand and not speculative. Developers are also conservative and would rather test the market first before launching a project.

However, inflation remains a challenge. The BSP increased its inflation forecast for the year to 5.3 percent from 5.2 percent, but had cut its forecast for 2019 to 3.5 percent from 4.3 percent. Inflation is seen to ease to 3.3 percent by 2020. Housing affordability also remains a concern for many Filipinos, although we hope that the government will come up with robust housing programs with the creation of the Department of Human Settlements and Urban Development.

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