DEVELOPMENTS in the Philippine economy bode well for the country’s real estate industry, but there remain a number of major challenges that must be aggressively addressed in order to maximize its full potential, the National Economic and Development Authority (NEDA) said.
“The shape of real estate industry in the Philippines has changed dramatically over the years,” Socioeconomic Planning Secretary Arsenio Balisacan said at The Organization of Property Stakeholders Inc.-Land Registration Authority (or LRA) Summit 2015 on Tuesday.
The property market grew strong over the last 20 years on demand for residential and commercial properties against the backdrop of the changing economic landscape in the Philippines, he added.
Balisacan, who is also the NEDA director general, noted the property market across the board —office, residential, logistics, retail, and hospitality—is poised for continued growth.
“While the property industry has already been doing very well in the past few years—owing to a solid economic backdrop, stronger demand for BPO [business process outsourcing]services, heavy consumer spending, and healthy inflow of remittances from OFWs [overseas Filipino workers]—the sector is seen to grow even more robustly, driven by the continued positive outlook on the economy and the projected expansion of outsourcing industry within the next five years,” he said.
For sure the country can maximize the full potential of the real estate industry, but the government must continue pursuing relevant market reforms to remain competitive and reap the benefits of the booming property sector in the region, the NEDA chief said.
“Some of the critical constraints that need immediate action are the country’s weak public infrastructure and low property market transparency and restrictive ownership rules,” he said.
Balisacan emphasized that the government is now devoting greater focus on infrastructure investment and putting in place comprehensive transport and critical logistics infrastructure roadmaps to keep up with the growing business hubs.
Another critical area of concern where policy reform is needed points to a low property market transparency and restrictive ownership rules, he said.
“Toward this end, the government is striving to improve transaction processes as well as legal and regulatory environments,” he added.
These include the liberalization of contractors’ licensing and registration, promotion and development of domestic and overseas construction, and the efficient implementation of dispute resolution mechanisms, the Cabinet official said.
Balisacan said there is a need to pursue a number of important legislative measures that will further reduce the cost of doing business in the country.
“For instance, the passage of the Competition Law last July 21 will undoubtedly help diffuse market power and concentration in a spectrum of key industries, including manufacturing and logistics,” he said.
Reforming the tax system and raising tax efforts to levels at par with regional peers is also crucial to sustaining fast-paced growth and public infrastructure development, he added.
Areas that need further institutional reforms include the tax effort among the self-employed and corporations, curbing smuggling, improving the current regime for small and medium enterprises (SMEs) and public-private partnership projects, and rationalizing fiscal incentives.
The NEDA chief said access to financing also plays a crucial role in the real estate industry.
“Unfortunately, the Philippines remain among the countries in South East Asia that have relatively underdeveloped financial markets. We continue to face limited access to finance via commercial bank loans and capital markets, especially those for business set-ups and expansion,” he said.
The challenge is to ensure more avenues for accessible financing, not just among property buyers but also SMEs, he said.
Balisacan pointed out that efforts to improve human capital formation and to foster technological growth and innovation should be intensified.