August 10, 2016

Lamudi Real Estate Report 2015

Lamudi Real Estate Report 2015 reported that the country's property market is booming, transforming the Philippines into a real estate investment hotspot.

Chapter 1: 
Local Market Overview

Comprising 7,107 islands wedged between the western Pacific Ocean and the South China Sea, the Philippines is a country of approximately 100 million people, one of Asia’s most culturally and linguistically diverse, and in recent years has emerged as one of the developing world’s investment havens.

Things started to look up for the Philippines in 2010 when regulatory reforms from the early 2000s began to take effect. In 2013 the country received its first long-coveted investment-grade rating from Fitch, which gave the country a BBB– with a stable outlook. An upgrade from Standard & Poor’s came soon after, and then Moody followed suit in late 2013.

Although the devastation caused by Typhoon Haiyan in November 2013 resulted in the country missing its target for the fourth quarter of 2013, the economy grew 7.2 percent for the year, beating expectations and becoming Asia’s second fastest growing economy after China. Albeit slower compared to a year earlier, the Philippines’ 6.1 percent GDP growth rate in 2014 was Southeast Asia’s fastest.

Philippine Economy

Although growth eased in 2015, the Philippine economy continued to outperform. The economy grew 5.2 percent during the first quarter of 2015, 5.8 percent in the second quarter, and six percent in the third quarter, making the Philippines the third fastest growing economy in Asia after China and Vietnam. Total growth for 2015 is estimated at 5.8 percent and forecast to rise to 6.4 percent in 2016, according to the World Bank. [1]

OFW Remittances

The Philippines was the world’s third largest recipient of foreign remittances in 2014. It is estimated that remittances from overseas Filipinos, numbering approximately 10 million, account for a tenth of the Philippines’ GDP. According to preliminary data from the Bangko Sentral ng Pilipinas (BSP), for the first 11 months of 2015, personal remittances from overseas Filipino workers (OFW) reached $25.249 billion, which is 3.4 percent higher than for the same period in 2014. [2]

According to the World Bank, remittances are an important source of cash for developing economies. With the exception of China, they far exceed official development assistance and even foreign direct investment (FDI). Remittances have proved to be more stable than private debt and portfolio equity flows, and less volatile than official aid flows.

Foreign Direct Investment

August 2015 saw the highest monthly foreign direct investment (FDI) inflows since December 2014, at $526 million, which is a 74 percent increase year-on-year. Despite reaching $4.5 billion for the first nine months of 2015, FDI inflow to the Philippines for January to September was 5.5 percent lower compared to the same period in 2014.

In 2014, BSP data shows that FDI inflow rose 61.6 percent during the first 11 months of the year, compared to the same period in 2013. Net FDI inflows from January to November of 2014 amounted to $5.7 billion, compared to $3.5 billion during the same period in 2013.

The Philippines still lags behind its neighbors, such as Indonesia and Thailand, in terms of attracting FDI. In 2013, Indonesia attracted $18.4 billion of FDI inflow, while $13 billion poured into Thailand for the same year. A year earlier, other ASEAN countries outperformed the Philippines in terms of FDI inflow, with Singapore posting a net FDI inflow of $56.17 billion; Indonesia with $19.85 billion; Thailand with $10.67 billion; Malaysia with $9.4 billion; and the Philippines with only $3.2 billion.

Real Estate Market

The Philippines’ real estate market in 2014 was best described as buoyant. According to Colliers International, better economic conditions and ramped up government spending drove real estate growth, if not for the residential sector but for other segments, such as industrial, hotel, retail, and office. The Philippines was also named one of Southeast Asia’s best performing markets in JLL’s Real Estate Transparency Index in 2014.

In 2015, JLL recognized Metro Manila as one of its top 30 real estate investment cities in the world in its Commercial Attraction Index [3]. According to the global real estate consulting firm, the key feature of a successful city is about sustainable momentum, adaptability and the ability to reinvent itself, and Manila definitely has these qualities.

JLL predicts that by 2030, Manila will be a top 18 city in the world in terms of city gross domestic product, having one of the highest economic momentum globally, along with Jakarta (Indonesia) and Istanbul (Turkey).

Metro Manila

New players have entered Metro Manila’s office sector due to bullish demand, according to the Q4 2014 report from Colliers. More than 195,000 sq m of office space was completed in the last quarter of 2014, the highest in a single quarter since Q1 2013. Despite this new supply, vacancy rates remain stable in the Makati CBD at two percent, resulting in an acceleration of rents.

Prime residential real estate, on the other hand, saw stable growth of rental rate and capital value in the same period, although preselling condo sales declined by seven percent year-on-year. According to Colliers, smaller-sized condo units are set to dominate Metro Manila’s condo market over the next four years. Close to 75 percent of new supply to be turned over between 2015 and 2018 will comprise studio and one-bedroom units (ranging in size from 18 to 90 sq m). The influx of these smaller units is expected to create pressure on rental rates and resale prices.

CALABARZON

As the Philippines’ second most economically important region after Metro Manila, CALABARZON (comprising the provinces of Cavite, Laguna, Batangas, Rizal, and Quezon) boasts the Philippines’ second largest gross regional product (GRP) at Php1.644 trillion ($37.14 billion) and a buoyant real estate market. [4]

The provinces of Laguna, Cavite, and Rizal are close to Metro Manila and for this reason, they are popular areas to buy a home for the capital’s millions of workers. For instance, the cities of Bacoor and DasmariƱas in Cavite, San Pedro and Santa Rosa in Laguna, and Taytay, Cainta, and Antipolo in Rizal are home to numerous residential subdivisions that offer houses from as low as Php1 million in Cainta ($22,160) to as high as Php35 million ($775,700) in Ayala Southvale in Bacoor.

However, the region also boasts a buoyant leisure real estate market, especially Tagaytay City in Cavite and the towns of Nasugbu and Calatagan in Batangas. Vacation homes, condos, and beachfront houses within master-planned communities are quite common in these areas, such as Playa Calatagan, Pico de Loro, Twin Lakes, and Tagaytay Highlands.

Metro Cebu

Metro Cebu - comprising the cities of Cebu, Mandaue, Lapu-Lapu, Talisay, Carcar, Danao, and Naga, and the municipalities of Compostela, Consolacion, Cordova, Liloan, Minglanilla, and San Fernando - ticks all the boxes of an attractive real estate market.

The metro is Central Visayas’ economic powerhouse, home to 80 percent of the Philippines domestic shipping companies, and a thriving tourist destination in its own right. Homebuyers here can enjoy easy access to both the metro’s central business districts and to white-sand beaches and world-class diving sites.

Major property developers have been active in Metro Cebu for years, pouring money into mixed-use projects, such as Megaworld’s Mactan Newtown and Ayala’s Cebu Park District.

Davao City

Davao City is emerging as Mindanao’s real estate hotspot, thanks to its relative stability and a local economy that is ripe for further expansion and development. Colliers has also identified the city as Mindanao’s condo hotspot: from a mere 1,203 condo units launched in 2009, new launches grew 54 percent annually to 6,768 units by the end of 2014.

National developers have also made their presence felt in Davao City. The SM Group have two malls in the city (SM City Davao and SM Lanang Premier), while Ayala subsidiary Alveo Land is expected to turn over Abreeza Residences this year. Megaworld Corp., on the other hand, has earmarked Php15 billion ($331 million) to develop its first mixed-use township in Mindanao, the 11-hectare Davao Park District on the former Lanang Golf and Country Club site.

Central Luzon

The region, especially the provinces of Zambales and Pampanga, has been a real estate hotspot since the closure of the U.S. bases in the early 1990s. Pampanga’s Clark Air Base, for instance, has reemerged as Clark Special Economic Zone, which is now a hub for business, industry, aviation, and leisure and tourism. The same has happened to neighboring Subic in Zambales.

Property developers have been pouring investments into Central Luzon over the last few years. Ayala Land in 2014 launched two mixed-use projects in the region: the 1,125-hectare Alviera in Porac, Pampanga, and the 98-hectare Altaraza in San Jose Del Monte, Bulacan.

Recently the government’s Bases Conversion and Development Authority (BCDA) has bid out development rights for 254 hectares of land within the 9,450 hectare Clark Green City between Tarlac and Pampanga.

Footnotes
[1] The World Bank - Global Economic Prospects, East Asia and Pacific - January 2016
[2] Bangko Sentral Ng Pilipinas - Overseas Filipinos' Remittances
[3] JLL - Global 300 City Toolkit
[4] All currency conversions correct at time of writing (July 2015)

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