The Philippine property market is in a wait-and-see phase as the election of Donald Trump as US president poses uncertainties to the two main growth drivers of the country’s real estate market, real estate services firm Colliers International said on Thursday.
In a quarterly property briefing, Colliers International director for valuation and advisory Julius Guevara said that the Trump presidency as well as President Rodrigo Duterte’s anti-America sentiments could have a negative effect on the country’s business process outsourcing (BPO) industry and overseas Filipino workers (OFW) remittances, which are the main drivers of the property sector’s growth.
Guevara noted that the fears the office property market currently face are founded on Trump’s protectionist stance, which he was very vocal about during his campaign period.
“He would protect American jobs going outside through outsourcing. It’s something that he would like to reduce,” Guevara told reporters on the sidelines of the briefing.
“At this point, all you can really do is wait and see whether or not real policies will be placed by the new Trump government,” Guevara said.
As the country awaits the policies to be pursued by the Trump administration—primarily policies on US job protectionism—Guevara noted that so far, there has been no change in activity in the BPO sector or the wider property market.
“So far, as far as our clients are concerned, none of them have actually reduced their requirement in the BPO space but the due diligence period has increased,” Guevara said.
Apart from the issue of Trump’s stance on US job protectionism, Colliers noted that another issue affecting American companies operating in the country is the anti-American sentiments of President Duterte.
“Recent statements by President Duterte against the United States and its economic interest in the country have shaken American businesses operating locally,” Colliers said.
Meanwhile, Guevara noted that US-based companies who are outsourcing their operations in the Philippines are starting to look for other outsourcing locations.
“They’re just more wary of what they’re doing. Of course, some companies are looking at other options—if there are other options apart from the Philippines. Of course, we continue to be a very strong option for them in terms of the talent, the cost and so forth. But if another option emerges where there’s less political risk then they will probably entertain those as well just to lower their operating risk,” Guevara said.
One of these alternative locations as cited by Guevara is Latin America, which is geographically closer to the US.
“It’s closer so it’s near shore but of course the pricing is different. The level of English is also good in some Latin American countries,” the real estate analyst said.
Guevara noted that the wait and see period will last for about six months, similar to the wait and see period witnessed when President Duterte was elected into presidency earlier this year.
Despite Trump’s protectionist view, Guevara expressed his sentiment that the interest of American companies will prevail.
“At the end of the day, the interest of the American companies will prevail,” Guevara noted “If you’d take a look at the revenues of these American companies, most of them are outside of the US. So, they would have to consider where they could continue to get very good margins while also answering to the regulatory requirements.”
“Apart from the threat on the BPO industry, Guevara noted that Trump’s protectionist’s view could also impact the remittances from the OFW market, which is growth driver in the property market.
“This might affect our undocumented Filipinos in the United States if they are forced to come back and we might see a slight reduction in the remittances,” the real estate analyst said.
Guevara noted that this could result in a decline in OFW sales in the residential property market.
“It might. I cannot quantify that at this point, but of course we might have to anticipate that kind of downward trend,” Guevara said.
Moreover, with the challenges the BPO and OFW markets are facing–which could impact the property sector– Guevara said there is a need for Philippine markets to transition to offering higher value services, and catering to other countries, to better protect the growth of our industries and economy.
“I think our two growth stories are now being challenged so our growth stories might be history. So, that’s something that we carefully need to think about,” Guevara expressed.”You have to transition. For higher value services, I think it’s easier. It’s easier to protect.”
Based on the latest roadmap of the Information Technology and Business Process Association of the Philippines (IBPAP), the organization is pushing for a shift in higher value, knowledge process outsourcing (KPO) jobs as lower skilled employments by the BPO industry are projected to drop in the next six years.
“With this shift, developers should assess the needs of KPO-oriented tenants, which are different from the requirements of call centers and other BPO-type occupiers,” Colliers said.