RAPID growth of the rental property market is expected in the next few years, several analysts said, with the expansion of the business process outsourcing (BPO) industry as well as persistent congestion in urban areas driving the trend.
In an interview last Wednesday, Leechiu Property Consultants (LPC) Chief Executive Officer David Leechiu described dormitory and other small residential accommodations as a likely a future trend in the property market, with projected growth of the BPO sector in the coming years boosting demand for rental residential properties, particularly dormitories.
“That [BPO] will also increase housing requirements, residential requirements because the moment jobs come to a community, everything changes, the economic activity changes,” Leechiu explained.
Leechiu also said that the growing traffic woes of the cities would have an impact on rental property demand.
“The traffic is just going to force people to live closer [to work]and have halfway homes. And people want quality, professionally-operated dorms,” Leechiu said.
Leechiu said that demand for rental residential properties would also grow if would-be residents’ perceptions improved.
“People have to get over this notion that renting is bad, renting is throwing money away. It’s not true,” he said.
With the country’s relatively young workforce, with an average working age of 23.2 years old, Leechiu suggested that renting a property might be a smarter choice for those who are just starting out in their careers.
“If you’re starting out, one of the best things you can do is to just rent and invest your capital outside–in the stock market,” Leechiu said. “Because to own real estate right away, mabigat masyado. You have to pay insurance, you have to pay maintenance, you have to pay taxes. That’s hard.”
Lamudi Philippines managing director Jacqueline Van den Ende, in an interview back in August, had a similar observation.
“Most BPO workers are renting. The average salary is P23,000. You can’t really spend P7,000 to P8,000 [a month]on amortization so you can’t really buy a house. So people rent,” Van den Ende explained.
DMCI Holdings Chairman and President Isidro Consunji made the same point in an earlier interview in calling on the government to reconsider its calls for mass housing and instead look at concepts like moderately-priced rented shelter housing. Since many Filipino families earn P30,000 per month or less, they could not afford a typical monthly amortization of P10,000 to P15,000 a month, but instead “could actually pay only P5,000 to P6,000 as shelter fee… What we need is not necessarily ownership of real property, but something that is useable,” Consunji said.
Lamudi Philippines, in a statement late last week, stressed that home ownership is a big financial decision that needs to be well thought out.
“Buying a home is the biggest financial decision most people will make in their lifetime, and like any investment, it also has its fair share of drawbacks. Ignoring the warning signs can lead to a mistake in the decision or buying process, which at best could lead to time wasted and a purchase that does not push through,” Lamudi said.
Moreover, Colliers International director for research and advisory Julius Guevara earlier noted that the rental market something that should be explored because of the growth opportunities it presents.
“Actually what we’re seeing right now would be worker housing, which is for rent—especially in the fringes. So that is a need that is found not only in Metro Manila but in all cities where you find BPO,” Guevara said in an earlier interview.
Aside from the robust BPO industry, Guevara also noted that the rental market trend provides a band-aid solution to unsold condominium units.
Guevara pointed out that developers have noticed of the trend towards the rental market, as a few smaller developers have already entered the worker housing market.
“I think that would be a trend right now, especially with the decline in sales. Developers are taking note of it. They know that abroad, the multi-family sector, which is basically for rent, is very huge in the developed economies. I think they’re going to think about that,” Guevara said.