PH presents ideal landscape for property investment
Written by: Amy R. Remo
As one of the fastest growing economies in the world today, the Philippines presents an exceptional window of opportunity in the real estate sector amid headwinds and weaker global prospects.
“The Philippines, despite everything that’s going on in the world, is one of only three countries [performing] gracefully economically and certainly more gracefully in the property sector,” said David Leechiu, co-founder and CEO of Leechiu Property Consultants (LPC) Inc. “What keeps the Philippines afloat in the last 20 years are the business process outsourcing (BPO) sector, remittances (from overseas workers), consumption, demographics and huge government spending.”
Jonathan L. Ravelas, senior adviser at Reyes Tacandong & Co., pointed out that there are reasons that will trigger that optimism amid the impact of external factors. These include the passage of the country’s 2023 budget, fiscal consolidation, favorable demographics and economic environment, continued infrastructure spending, strong credit rating and sound financial system, slowing inflation, among others.
“These would eventually drive a lot of economic activity in the Philippines,” Ravelas said.
In particular, Ravelas pointed out that the government’s P9-trillion infrastructure program will not only help drive the country’s growth and expected recovery in 2025, but will also help the real estate sector to build momentum.
Historically, increased infrastructure spending has helped boost growth as seen in the “drastic increase in our (economic) recoveries” over the last decade due to the implementation of the public-private partnership (PPP) and Build Build Build initiatives. Similarly, infrastructure has had a huge impact on real estate, as one of its most important effects is improved accessibility which, in turn, has helped prop up property prices and land values over time.
Given this aggressive infrastructure buildup and the country’s continued recovery, one stands to gain from a resilient sector like real estate—considered by Leechiu as the “best instrument for investment in the last 60 years” and “the most resilient asset class in the world.”
Despite the numerous crises, natural disasters, political upheavals, election cycles and most recently the pandemic, the Philippine property sector has remained vibrant over the last 22 years. There are now 169 townships spanning 62,500 hectares across the country. Data from LPC showed that in Metro Manila alone, there are 13,264 hectares comprising townships and reclamation projects in varying stages of completion.
Ravelas meanwhile pointed out that office and residential capital values also continue to appreciate amid the boom-bust cycles of the past two decades.
More specifically, Ayala Land’s projects have seen tremendous capital appreciation with exponential compounded annual growth rates (CAGR) and impressive rental yields. “Look at Forbes Park today which is at P500,000 per sqm. What was once worth P50 million is valued at P1 billion 23 years after. What changed? The per capita income changed from $1,500 in 2000 to about $3,300 to $3,500 today. (The increase in per capita income) will have a direct impact on how prices are going to change in real estate. It’s going to be buoyed up just because of the sheer volume of wealth being created in this economy,” Leechiu said.
“If you look at the entire portfolio of Ayala Land, you’ll see how the projects continue to appreciate from the time it was launched. Note that most of these projects continue to appreciate in value despite the pandemic,” Leechiu added.
Data from LPC showed that Ayala Land’s gated village projects in Makati, including Forbes Park, Bel-Air Village, San Lorenzo Village, Dasmarinas Village, and Urdaneta Village, have seen CAGRs of up to 16 percent. Prices of Ayala Land’s residential condominium projects in Metro Manila are also seeing steady CAGR of 6 percent to 14 percent and capital appreciation of as much as 254 percent from 2008.
Such developments, according to LPC, are in high demand among buyers “due to [their] appealing combination of open space, quality amenities and efficient property management.” For example, Ayala Land’s Serendra in BGC, which was launched in 2008 has seen capital values appreciate by as much as 254 percent, while over 119 percent is seen for Portico, Alveo Land’s signature development in Pasig.
This is why now is the best time to invest in these properties for value and price appreciation, especially over the long term.
Admittedly, property prices within Metro Manila are at an all-time high despite the pandemic. But what’s good, according to Ravelas, is that homebuyers and investors eyeing for a lower cost investment can also consider developments outside Metro Manila.
Ayala Land’s condominiums and horizontal developments in provincial locations present high growth opportunities. LPC data showed that these projects’ CAGR can range from 4 percent to 11 percent. Their attractiveness can be attributed to their location, often within masterplanned communities, proximity to major thoroughfares and exceptional amenities and features.
Alveo Land, in particular, currently offers choice developments in areas such as Cebu, Davao, and CDO on top of its strong portfolio in Metro Manila.
Such projects are likewise assured of capital appreciation given the government’s aggressive infrastructure build-up, which can in turn help improve accessibility and connectivity in the provinces, and boost attractiveness of the real estate projects in those locations.
Currently, there are 256 national and local PPP projects in varying stages of completion. Among those completed in 2022 and this year were the Tarlac-Pangasinan-La Union Expressway; Plaridel Bypass Road Phase 2; Alabang-Sucat Skyway Extension; Central Luzon Link Expressway; Estrella-Pantaleon Bridge; Binondo-Intramuros Bridge; NLEx-Harbor Link; and Skyway Stage3. Much awaited meanwhile are the Metro Manila Subway, North-South Commuter Railway and Samal Island-Davao City Bridge.
Amid all these developments and the country’s strong performance, the Philippine real estate sector today is indeed rife with viable prospects. Whether for own use or investment, these are ideal opportunities to consider investing on now more than ever.
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