New projects include P50.2B prison and upgraded court houses
THE Philippine property market is forecast to grow at an annual average of 9.8 percent by 2026, among the fastest in Southeast Asia. This growth is backed by sustained investment from the public and private sectors, a private think tank said recently.
“Growth in the Philippines’ residential and non-residential building sector will remain robust over the coming years, supported by public and private investment in real estate, commercial developments and industrial facilities,” Fitch-owned BMI Research said in a report.
The residential segment will be boosted by the government’s backing to bridge the 5.7 million housing backlog in the country through the construction of affordable housing.
“The housing market continues to show signs of growth in 2017, with more than 30,000 residential construction permits issued in the second quarter, a 24 percent increase over previous years,” it said.
“Housing prices, particularly in Metro Manila/National Capital Region, remain strong, fuelling investment interest. In view of these positive factors, we forecast that growth in the residential building sector will average 10.3 percent in real terms between 2018 and 2026.”
However, the forecast can be tempered by the expectation that the Philippine central bank will raise its benchmark interest rates by a total of 50 basis points by end-2018, with the view that the current rate of 3 percent is too low amid economic growth and inflation trends.
“[But] we do not believe this will significantly affect the residential building segment in the long term, given the Philippines’ strong market fundamentals and persistent housing shortage,” it said.
In the non-residential front, BMI sees the segment averaging to 8.4 percent in the same period as sustained demand and dropping vacancy rates in offices and industrial space will support new construction.
Lowest office vacancy rate in Asia
Manila’s office vacancy rate of 2.4 percent is the lowest among major cities in Asia, according to real estate firm Cushman and Wakefield, while a separate report from Colliers International said it expects office demand to grow by 8 percent over the next year.
“These factors will sustain growing investments in the construction of new office spaces over the next decade. For investors and developers, opportunities will be supported by the Philippines’ liberal investment climate, which has few foreign ownership restrictions and is therefore welcoming to international and private investors,” the think tank said.
It will also benefit from government-led infrastructure projects, many of which are being introduced as public-private partnerships.
“Notable initiatives in the pipeline include upgrading and modernization works for courthouses across the Philippines, a new office building for the Department of Trade and Industry and the construction and maintenance of a P50.2 billion prison facility,” BMI said.
“The previous Aquino government had also turned to PPPs to build schools and hospitals in the past. We expect a number of larger-scale social infrastructure projects to be launched as PPPs in the future, given the growing population’s need for education and healthcare facilities.”
“Overall strength in the construction industry is also generating demand for construction-related materials, and will spur investment in steel and cement manufacturing facilities,” BMI said.