By Manila Times
February 6, 2019

A real estate consulting services company revealed that the government’s tax reform and infrastructure programs have shaped the real estate market in 2018.

They would continue to do so in the first quarter of 2019 and even beyond, Pinnacle Real Estate Consulting Services Inc. said in its latest study.

Other indicators, the study said, include the adjustment of price ceilings for socialized and low-cost housing, responsible and sustainable tourism.

“The Train Law, the government’s “Build, Build, Build’ (BBB)program, adjustment of price ceilings for socialized and low-cost housing are some of the real estate market indicators that defined 2018 and what will shape the market in the years to come,” Pinnacle’s research said.

Train Law and real estate

The Train Law refers to Republic Act 10963 or the Tax Reform for Acceleration and Inclusion, which took effect on the first day of 2018. Its main purpose is to implement revisions in the Philippine internal revenue tax system, thus providing additional disposable income to working Filipinos.

Aside from this, Pinnacle said there were also allied gains in the taxes involving real estate transactions. Some of these are the rate-reduction and simplification of the estate and donor tax systems and value-added tax base expansion affecting socialized and low cost housing segments, residential condominium dues, residential leasing, and the much-delayed Real Estate Investment Trust (REIT).

It is also said that 70 percent of the revenues from the Train Law shall be used to fund the infrastructure projects of the government.

Infrastructure gains for real estate

Pinnacle said the government continues to invest heavily on projects under the BBB program.

As of Nov. 30, 2018, the National Economic and Development Authority (NEDA) approved 35 infrastructure flagship projects with an estimated cost of P1.537 trillion.

This is in line with the current administration’s policy to undertake a minimum of P1 trillion worth of infrastructure projects per year until 2022.

On top of the list is the P357-billion Metro Manila Subway Project-Phase 1 funded by a loan from the Japanese government.

The 25.3-kilometer underground commuter rail system will be from Quezon City to Taguig City, with an extension going to the Ninoy Aquino International Airport (NAIA).

Adjustment on price ceilings for socialized housing

In 2018, the Housing and Urban Development Coordinating Council (HUDCC) issued House Resolutions 1 and 2 to increase the price ceiling for socialized subdivision and socialized condominium housing projects, respectively.

The adjusted price ceiling for horizontal socialized housing projects now range between P480,000 and P580,000.

Price ceiling for vertical socialized housing or socialized condominium projects is between P700,000 and P750,000 for Metro Manila and selected nearby areas, and between P600,000 and P650,000 for other areas.

There is no existing or separate housing ceiling under this category.

Boracay Closure

In April 2018, the government ordered the closure of Boracay Island for a period of six months to rehabilitate it.

Boracay reopened to the public in October 2018, and the government is now enforcing stricter rules and regulations in the operation and maintenance of the island in order for its tourism industry to be sustainable.

Major changes are the reduction of the daily tourist capacity and accreditation of resorts, hotels, and other lodging facilities to ensure they are environment-friendly before they operate.

Pinnacle said the closure and rehabilitation of Boracay might have encouraged sustainable and responsible tourism as the government closely monitors the situation in El Nido and Coron in Palawan, Puerto Galera in Oriental Mindoro and Panglao in Bohol.

New Manila International Airport in Bulacan

The 50-year concession agreement for the New Manila International Airport finally got the approval from Neda. San Miguel Holdings Corp. (SMHC), a subsidiary of San Miguel Corp., submitted the unsolicited proposal for the construction, operation and maintenance of the airport.

The project will be constructed in a 2,500-hectare land in Bulakan, Bulacan with an estimated project cost of P735.6 billion. Once completed, the airport would have a passenger capacity of 100 million a year, which is thrice the passenger capacity of the NAIA, Pinnacle said.

Updates on REITs

The Securities and Exchange Commission (SEC) and the Bureau of Internal Revenue (BIR) have made moves to dismantle two roadblocks that hinder the full implementation of the Real Estate Investment Trust (REIT) Law, Pinnacle said.

The SEC, for its part, has agreed to lower the minimum public ownership (MPO) to 33 percent, provided the BIR clarifies that initial transfers of property to REITs are exempt from Value-Added Tax (VAT) as provided by the Train Law.

Statements from BIR Commissioner Caesar Dulay affirm the interpretation of the Train Law, saying that the initial property transfers to REITs are VAT-exempt as long as they qualify under certain provisions of the law.

Trabaho Bill

The Tax Reform for Attracting Better and High-Quality Opportunities (Trabaho) Law or the second package of the Train Law was approved on third and final reading at the House of Representatives.

As its title suggests, its objective is to generate better and high-quality employment opportunities by attracting new business and investments through reduction of their corporate income tax (CIT).

The Philippines has the highest CIT among Asean countries at 30 percent. Singapore, which we could say is the most business-friendly state in the region, has a CIT of only 17 percent, Pinnacle said.

Cebu continues winning form in tourism

The second most important metropolitan area in the Philippines, Cebu has a prosperous tourism industry.

Pinnacle said the opening of the Mactan-Cebu International Airport (MCIA) Terminal 2 has been a game changer and has only bolstered the province’s position as one of the country’s top tourist destinations, according to the Department of Tourism (DoT).

MCIA data show there were 1.4 million foreign tourist arrivals in Cebu from January to September of 2018, which is 22.76 percent higher than the figure recorded for the same period in 2017.

Another industry that Cebu should focus on is the meetings, incentives, conventions, and exhibitions (MICE) industry, according to DoT chief Bernadette Romulo-Puyat.

Two major international events will be held in Cebu this year: Routes Asia 2019 and Center for Aviation’s (CAPA) LCCs in North Asia Summit.

Pinnacle said Cebu was a perfect target for big-ticket and high-profile events because of its touristy ambiance and its new airport terminal. The two events are expected to boost Cebu’s hotel occupancy this year.

Bay Area continues uptrend

With a condo stock of approximately 20,000 units as of 2018, Pinnacle said the Bay Area has already surpassed Ortigas Center as Metro Manila’s third largest condo submarket. It is expected to overtake the Makati central business district as the capital’s second largest condo submarket.

Meanwhile, the Parañaque side of the Bay Area will soon have its own anchor retail tenant when the Ayala Mall Bay Area beside the City of Dreams Manila opens in 2019.

Touted as one of the biggest Ayala malls, foot traffic will significantly increase on this side of Entertainment City. It will have a significant impact on the resale price of condos near it.

In addition, office rental rates in the Bay Area have already breached the P1,000 per square meter (sqm) per month mark, on par with rental rates of Grade A offices in the Makati central business district (CBD), Pinnacle said.

Central Luzon as new growth area outside Metro Manila

Pinnacle said the current administration’s goal of spreading business opportunities outside Metro Manila was definitely spilling over to Central Luzon, most notably the areas within and around the Clark Freeport Zone.

This development is boosted by several planned transport infrastructure projects that will improve the region’s connectivity.

One of these is the ongoing expansion project of the Clark International Airport, the first phase of which is scheduled for completion in June 2020. It involves a new 100,000-sqm terminal being built by Megawide-GMR consortium which is expected to increase Clark’s capacity to 8 million passengers per year.

Second in the government’s list is the Subic–Clark Cargo Railway, which will provide freight service between the Subic Bay Freeport Zone and the Clark Freeport and Special Economic Zone.

Several national real estate players are seen to benefit from these ongoing developments, most notable of them include the Filinvest group, Dennis Uy’s Global Gateway Development Corp. (GGDC) with its Clark Global City, and SM Prime.

Recently, GGDC has engaged the SM group to be the first anchor locator in Clark Global City. Pinnacle data show a burst of activities in Central Luzon, most notably in Mabalacat, Mexico, San Fernando, and Porac in Pampanga, areas that surround Angeles City.

Davao as the next destination for investment

Two of the most exciting places in the Philippines at the moment, Davao City and the larger Davao Region would be the places to be this year, Pinnacle said.

One of the region’s major draws is the planned transport infrastructure projects aimed at mitigating congestion in Davao City itself and improving transportation logistics for the whole Davao Region.

Foremost is the construction of the 44.6-kilometer Davao City Bypass Road that will commence in 2019. This ambitious project will include a tunnel section. It will start from the Davao–Digos of the Pan-Philippine Highway in Toril and end by intersecting the Davao–Agusan National Highway in Panabo City.

The city’s airport will also receive a much-needed upgrade soon, thanks to the Davao Airport Operations, Maintenance and Development Project that will start in 2019.

Once completed, the airport’s design capacity will be increased by 500 percent to 17.9 million passengers per year. Data show that in 2017, the airport handled 4,234,667 passengers which was way above its design capacity.

Pinnacle said that with key infrastructures set to be delivered over the next few years, property developers had been very busy changing dramatically the landscape and skyline of Davao City.

A multitude of property giants are bringing their unique and different brands into the real estate market of the city. One of the most anticipated developments is Ayala Land’s Azuela Cove and Megaworld’s Davao Park District.

The rise of condo submarkets outside traditional CBDs

With land prices in the Makati CBD and Bonifacio Global City scarce and prohibitively costly, Pinnacle said developers are venturing out of the traditional business districts for their next Metro Manila projects.

The Chino Roces area over the next few years will be a thriving condo submarket, similar to the north of Ayala area.

On the other hand, Ayala Land and Lucio Tan’s Eton Properties recently entered into a partnership to develop Parklinks, a 35-hectare master-planned project along C5 Road between Pasig and Quezon City (close to Eastwood City).

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