Multibillion-dollar deals elude PH

The Philippines has been losing out on multibillion-dollar property deals as global funds and ultra wealthy individuals shunned the local real estate sector due to restrictive foreign ownership laws and high taxes, officials of consultancy and brokerage firm Jones Lang LaSalle said Tuesday.

The amount of non-residential sector investments for shopping malls and industrial complexes was estimated at about $240 billion in Asia-Pacific over the last two years, said Alastair Hughes, Jones Lang CEO for Asia-Pacific.

Investors instead looked toward jurisdictions friendlier toward foreign investors like Japan, Singapore and China, according to briefing materials from Jones Lang.

Investing in the country becomes more difficult when the 40-percent cap on foreign ownership comes into play, along with heavy taxes like those levied on joint ventures and strict local building code regulations, noted David Leechiu, Jones Lang’s country head in the Philippines.

“It’s just adding to the layers and layers of restrictions coming from so many agencies,” Leechiu said.

But there are some positive aspects, he added, which includes the widening of the coverage of value added tax exemption on low cost homes worth up to P3 million instead of the previous P1.5 million.

“But there is still a whole lot more to work on,” Leechiu said. He suggested that an increase in the foreign ownership cap on property to 50 percent would carry huge benefits for the real estate sector.

Leechiu also cited the potential for local real estate to continue growing, driven by strong economic fundamentals and demand for housing.

Hughes also mentioned the lack of any indication that a property bubble could be forming.

“I don’t see any of those factors playing out in Asia-Pacific or anywhere else. I think this is a relatively stable market,” Hughes noted.

On the residential side, Leechiu said that restrictive policies could discourage builders in the low-cost segment over the long-term as 60 percent of condominium projects are aimed at the “below P3 million” per unit market.

He nevertheless acknowledged that construction would not likely slow down anytime soon due to strong demand.

“For now, times are good and developers will find ways to work with the rules,” Leechiu said.