BACKED by a government in pursuit of the “golden age of infrastructure,” the Philippine real estate industry continues to boom amid a growing economy and improving policies for investors.
The expanding business process outsourcing (BPO) industry, robust online gaming operations and steady overseas Filipino worker remittance flows are also driving continued demand.
It is, however, tempting to ask how long such growth will last. Looking for a definite answer is much like searching for a needle in the haystack, but analyzing the growth factors can generate some indications.
The real estate sector boom is a byproduct of the growing local economy, which is expected to expand by 6 percent this year. Bankers say economic prospects are brighter amid slower inflation and policy rate cuts — seen as pluses for domestic spending. Interestingly, not many economies have grown at 6 to 7 percent for the past 10 years.
The industry is also upbeat about government efforts to attract investors. The passage of a proposed law that will gradually lower corporate income taxes and rationalize tax incentives is one and investors are keen to see the final version of the Tax Reform for Attracting Better and High-Quality Opportunities or the Trabaho bill. Now called the Corporate Income Tax and Incentives Reform Act or Citira, it was recently approved by the House of Representatives’ ways and means committee.
Another come-on is the implementation of the Ease of Doing Business Act, signed by President Rodrigo Duterte last year in a bid to reduce red tape. Republic Act 11032, among others, mandates reduced processing times for transactions and the simplification of steps for securing permits and paves the way for the creation of the Anti-Red Tape Authority.
Outsourcing, meanwhile, has made the Philippines the “BPO Capital of the World,” generating billions of dollars in revenues and driving demand for office space. It has found competition in the Philippine Offshore Gaming Operation (POGO) segment, which is expected to become the largest consumer of office space in Metro Manila.
Offshore gaming, according to a report, has grown substantially under the Duterte administration, in the process gobbling up office spaces in Bay City, Makati City and Alabang. Leasing demand for residential condominium units has also soared given the influx of POGO workers from China.
At the residential end of the spectrum, remittances from overseas Filipino workers have also contributed to the growth of the Philippine property business. Awash with cash, overseas Filipinos and their families are joining the rush to buy properties for personal use or investment.
Bangko Sentral ng Pilipinas data show remittances at $2.9 billion in May 2019, up 5.5 percent from a year earlier. Year to date, personal remittances increased by 4.1 percent to $13.7 billion. With Filipino workers remaining in demand overseas, it can be expected that more Filipino families will be buying and investing in real estate.
The Duterte administration’s Build, Build, Build program has provided a substantial helping hand. Initiated at the onset of President Duterte’s administration, the infrastructure program aims to fill the country’s lack of much-needed facilities, with around P8-9 trillion planned for spending up to 2022. Developers in response are expected to implement strategies revolving around the bridges, highways and airports, among others, to be built under Build, Build, Build.
Cities outside the metropolis will be more accessible, and demand for commercial and office spaces is expected to spike. For example, demand has reportedly surged in Bulacan, Cavite, Laguna, Batangas and Pampanga because of planned government projects.
Does it follow that the property boom will stop at the end of this administration? With less than three years before Duterte steps down, builders have adopted a 10-year roadmap that aims to institutionalize the gains from Build, Build, Build. The outlook is that the boom could extend by another decade.
In the meantime, however, the real estate sector can be expected to remain supported by the overall economy, investor policies, BPO/POGO, remittances and other factors that appear to be in a state of solid synergy.