Philippines is currently experiencing the best real estate market in the last 20 years. The Real estate industry in the Philippines is on an uptrend path as overseas Filipino workers (OFW) remittances remain to be the largest contributor to its growth. In the first half of 2012, remittances contributed Peso1.8 billion to the Philippine economy while in 2011 it reached USD 20.1 billion, around 9.4% of GDP. Besides remittances, business process outsourcing was also identified as one of the main drivers of the real estate growth in the country. The BPO industry has fuelled the demand for office space and even residential units while remittances fuel demand in the low-end to mid-range residential market.
Income generated from services under the Real Estate sub-sector grew annually by 17.0%, while renting and other business activities increased by 9.6%. There is about 5.2 million sq m of leasable retail space, 2.11% higher than in the fourth quarter of last year. According to real estate and advisory firm CBRE, a total of 105,722 units are expected to be completed by the end of 2012, and at least 14,112 residential condominium units will likely enter the market.
As growth accelerates, the government is also moving to professionalize the real estate industry. In a further boost for the mid-income market, in April 2012, the Social Security System (SSS) cut interest rates and raised the maximum amount of its housing loans to help members gain wider access to homes at affordable terms. In order to encourage the development of new IT parks and buildings outside Metro Manila and the regional centre of Cebu City, the Philippines Economic Zone Authority (PEZA) has passed a resolution that removes the incentive of 5% tax on gross income in place of the normal 35% corporate tax for developers of future IT parks and buildings outside Metro Manila and Cebu City.
Further, property giant Ayala Land announced investment plans worth Peso 90bn ($2.09bn) for 67 new projects to expand into new market segments and new locations. They sealed a Peso 15-billion peso deal with property developer Ortigas Holdings for the development of the Ortigas family's land bank areas, including the Greenhills Shopping Center and Tiendesitas.
With the construction of many special economic zones and foreign manufactures looking for lower-cost operating environments, the industrial real estate market is also potential heavy. Sustainable development is one of the new trends in Philippine real estate, which aims to minimize the adverse environmental impact of continuous property development.
Bank lending rates are still on the downward trajectory, sustaining the liquidity in the financial system. Demand in the residential sector remains strong due to the increasing affordability of funds for housing acquisitions. In Metro Manila, supply remains considerably high across condominiums with some 33,000 units completed and over 50,000 units launched last year. Real estate services firm in Manila, Jones Lang LaSalle, estimates that 154,000 new units will be built in the country between this year and 2016: 30% more than the 118,000 units completed between 1999 and 2011.
Confidence in the Philippines' property market is being fuelled by economic growth, an influx of expatriate workers and rising investment by overseas Filipino workers (OFWs). With inflation rate further contracted to 2.7% the lending rates are hovering around 5%-8% which is very low. Thus, the Philippine real estate sector has proved to be resilient and will attract a lot of investment in the coming future.
(Source: Insight Alpha)