Transactions in the country’s real estate market are dominated by local players due to the structural shortage of suitable investment products weighing on foreign parties, according to a report by KMC Mag Group.
In the report, it was noted that the volume of property-related transactions made in the previous year increased by more than 20 percent to P79.9 billion, driven by growing occupier demand from the offshoring and outsourcing O&O sector.
KMC Mag also pointed out that the number of property-related transactions made in 2015 rose by 13 percent to a total of 34 transactions, compared to the previous year’s 30.
But despite the positive investor sentiment, KMC Mag said the structural shortage of suitable investment products is discouraging overseas investors to do business in the country.
“Thus, the transaction volume remains relatively low and deals are predominantly concentrated around development sites and executed by local developers,” KMC Mag Group said.
It noted that local developers dominated the purchaser category in the investment market in 2015 as they accounted for 65.6 percent of the total volume or P63.5-billion worth of transactions.
This is expected to continue in 2016 as capital expenditure programs of local property developers are seen to reach P370 billion, a 2.9 percent increase from the P360 billion CAPEX recorded in 2015.
“While a majority of this capital is covering ongoing projects and new launches, investment sales have certainly picked-up as well in recent years as evidenced by the increasing transaction volumes,” the report said.
KMC Mag Group Head of Reseach Antton Nordberg noted that the strict ownership rules are hindering investors from coming into the country.
“The Philippines’ strict foreign ownership law still remains as the obstacle to greater participation from overseas investors, although they are still able to participate via joint venture partnerships or debt funding,” Nordberg said.
Some of the deals that were made last year include the $150 million debt facility by ADM Capital and Baring Private Equity for the funding of five office buildings in Clark, and the joint venture partnership of Mitsubishi and Century Properties Group for the development of the Forbes Media Tower in Makati City.
Similarly in a recent interview, European Chamber of Commerce of the Philippines (ECCP) Vice President Henry Schumacher said the loosening of foreign ownership rules in the country is something that the next administration should look into to promote inclusive growth.
“The question of course is how open will the next admin be, will they open up to create a fair level playing field. Will they address the 60-40 issues, do we want more foreign investments coming in. These are the issues hanging in there,” Schumacher expressed.
Aside from promoting inclusive growth, Schumacher said the entrance of foreign investors into the country would create more competition in the market, which could result in offering better products to the market.
“The prime view should be competition. And if you have competition, you can develop products and you get a better service at a better price,” Schumacher said.