February 14, 2018
WHEN we look at the continuously changing horizon in Metro Manila and other areas that are undergoing urbanization, it’s easy to say the Philippines is enjoying a real estate boom.
Actually, I think that we’re actually just playing catch-up because our neighbors like Thailand, Malaysia and Singapore are still ahead in terms of property development.
Nevertheless, the domestic property sector has not been far behind in terms of diversification, as developers, particularly the big players, have spread their wings to other areas. The emergence of the business process outsourcing (BPO) industry, for example, created office-building development as a major segment of the property sector.
Modern lifestyle, coupled with mobility problems, gave rise to the live-work-play concept, which involves the construction of mixed-use projects that allow people to live, work, engage in recreational activities or even pursue educational careers in one place, eliminating the need for time-wasting travel in the congested roadways.
The diversified nature of today’s property sector also cushions the impact of adverse developments in some areas, allowing the industry to sustain overall growth.
The property sector does not always move in a straight line – up or down – but like a wave. Lucky breaks or compensating factors emerge that allow the industry to recover from a decline.
For instance, demand for office space from the business process outsourcing (BPO) industry, which has been a major driver for the economy in the past few years, declined last year, but the slack was taken up by new demand from the gaming industry.
On the other hand, the perennial demand in the residential segment, where there is a backlog of several million units, should keep both horizontal and vertical homebuilders busy.
A study by property consultant Colliers Philippines cites other factors that boost the real estate industry. The firm said consumption, manufacturing, exports and infrastructure, which fueled the economy’s 6.7-percent growth in 2017, support the property sector’s upward trajectory.
Colliers said personal consumption, which grew by 5.8 percent last year, is expected to pick up in 2018 due to the implementation of the first package of the comprehensive tax reform program, which would increase employees’ purchasing power.
Consumption is also buoyed by low inflation (the government is targeting 2 to 4 percent for this year), which means stable interest rates, and OFW remittances, which reached $28.2 billion in January-November 2017, up 5.1 percent year-on-year.
Again, President Rodrigo Duterte’s drive to bring development to the countryside will also benefit the property sector. According to Colliers, about 70 percent of the additional revenues (close to P90 billion) that will be generated by the first package of the tax reform program will go to the “Build, Build, Build” infrastructure program, including the concretization of more than 14,000 kilometers of national roads and about 30,200 kilometers of local gravel roads. The government will also provide road access to nearly 8,000 isolated barangays and sitios, which would further unlock land values in the countryside.
Eight of the 10 projects that will be implemented using the additional tax revenues are in the provinces, supporting the government’s decentralization push, which should benefit developers with office, residential and retail projects in those areas.
While these projects have yet to be fully implemented, we see the major players in the property industry already launching their respective projects to take advantage of the opportunities in their industry.
As one of the major integrated property developers in the country, Vista Land is allotting P175 billion for capital expenditure in the next three years, not only for its core real estate business, but also for leasing, retail, hospitality and education ventures.
About 60 percent of the capex budget will finance the company’s real estate expansion, while the rest will go to the leasing and retail businesses. Of the total amount, we plan to spend P50 billion this year.
As I said during a press briefing last December, we are very bullish in growth prospects in 2018 as we take advantage of the various collaborations among our companies, in addition to the sustained sound Philippine macroeconomic fundamentals.
I’m reluctant to use the term boom to describe the real estate industry’s performance. For me, a more accurate term would be robust growth, which the industry continues to enjoy today.
This piece first came out in Business Mirror on Feb. 5, 2017 under the column “The Entrepreneur.” For comments/feedback e-mail to: firstname.lastname@example.org or visitwww.mannyvillar.com.ph./PN