Posted on
July 11, 2013 09:05:49 PM [ BusinessWorld Online ]
Oxford
Business Group
DEMAND for
housing and office space in the Philippines is expected to remain high on the
back of impressive economic growth. Despite an increase in new space, property
developers expect vacancies in premium residential and office space across
business districts to remain scarce.
Reports put the occupancy rate in the central
business districts (CBDs) of Metro Manila, the country’s commercial bellwether,
at 97% in the first quarter of 2013. "The supply of premium residential
and office units in prime areas is limited. The demand is so high that, even
with new projects coming in, we expect the vacancy levels of premium real
estate in prime districts to remain below 5% for the next two years,"
Karlo Pobre, market analyst at Colliers International, told OBG.
According to
a report issued by Colliers in May, office vacancy rates in the city of Makati,
part of Metro Manila, stood at 3.38% as of March, down from 3.48% at the end of
2012. Regarding the residential segment, Colliers said monthly rental rates in
the Makati CDB for premium three-bedroom apartments grew by 2.3% over the same
period to reach P737 ($16.94) per square meter. The consultancy expects rental
prices for premium apartments in Makati, Rockwell and Bonifacio Global City to
rise by 8-9% over the next 12 months.
The real
estate sector has benefitted from the expanding economy, which grew 6.6% last
year and at an annual rate of 7.8% in the first quarter of 2013. The Asian
Development Bank (ADB) expects the Philippines to record growth of 6% this year
and again in 2014.
The decision
earlier this year by ratings agencies Fitch and S&P, meanwhile, to grant
investment grade status to the Philippines has triggered renewed investor
interest in the country. Real estate analyst Enrique M. Soriano III told the
Philippine Daily Inquirer, "The property sector is well on its way to
outperforming last year’s banner performance."
A boom in
business process outsourcing is adding to demand for better housing and office
space. Emerging business districts, such as Taguig and Quezon City, have seen
the sharpest influx of professionals working in this sector, according to the
real estate services provider, CBRE.
Landed
residential property is off-limits to foreign nationals under Philippine law,
but there is no restriction on foreign ownership of condominiums, better known
in Southeast Asia as luxury private apartments. Tighter property laws in
Singapore and Hong Kong have brought foreign investors to the Philippines in
search of high-end real estate.
Mr. Pobre
believes the ratio of foreign investors, including expatriate Filipinos, to
local players targeting prime property could be as high as 70:30. While foreign
interest is driving demand for property in Metro Manila’s higher-end business
districts, developments elsewhere are proving popular with Filipinos.
Low interest
rates and easy access to finance are helping to keep the real estate sector
buoyant, although a May announcement from Bangko Sentral ng Pilipinas (BSP)
that commercial banks had breached the 20% loan limit on the property sector in
2012 has raised concerns regarding the possibility of a bubble. The central
bank said loans had reached P821.7 billion ($18.89 billion) according to its
own calculations, higher than the banks’ reported figure of $14 billion.
BSP Governor
Amando Tetangco, Jr. told reporters in May he was confident that there was no
imminent risk to the market but said that the bank was considering new
regulations to address the issue. The topic is expected to be on the agenda at
the next Financial Sector Forum, an inter-agency coordination meeting held
every two months.
One final
factor that could contribute to growth in demand is the weakening currency. A
crash in the equities market on June 11 saw the peso close at P42.20 against
the dollar, marking its lowest rate in more than a year. While making the
Philippine economy more competitive, a weaker peso also provides incentive for
higher remittance inflows, which are expected to reach $24 billion in 2013.
With few other options offering similar returns, the real estate sector is
likely to look even more attractive to investors.
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