4 factors that drive PH property sector

Like other Asian markets, the Philippines continues to defy the downward pull of developed economies which are still reeling from the debilitating effects of the global financial crisis.

It has also maintained its own capital flow and among emerging markets in the Asia-Pacific region. It exhibited the highest annual growth rate so far.

With improved economic prospects, both foreign and local investors have begun to find economic value for their investments. And one sector that is benefiting from this is the real estate industry.

In the 6th Philippine Real Estate Festival with the theme “Philippine Real Estate Opportunities for Foreign and Local Investors” held recently at the World Trade Center in Pasay City, the event’s opening plenary session discussed the Philippines as a prime real estate haven for both local and foreign investors. Panelists included Vice President Jejomar C. Binay, also concurrent chairman of the Housing and Urban Development Coordinating Council, Representative Rodolfo Valencia and lawyer Miguel Varela, president of the Philippine Chamber of Commerce and Industry. The session touched on key factors why the country has become a real estate haven.

Emerging realty trends

Price Waterhouse Coopers and the Urban Land Institute (PWC-ULI) recognize the Philippines as a fast-emerging market. Under the new administration, the Philippines has become more politically stable and more pro-business than in the past. It has been removed from the “do not touch list” and there is now a growing interest in engaging in the real estate business in the Philippines.

Binay, who was also the fair’s keynote speaker, said investors started to see the Philippines as “viable and with minimum risks.” Based on the Prudential Real Estate Investors research in February of this year, the growth came from a combination of factors: first, economic growth is projected to increase at a faster rate in Asia than in other regions, and second, the relative wealth of Asian countries will improve.

“As the country’s population approaches 100 million, a consumer-based economy is emerging with all the needs and wants of the real estate market that is expected to grow each year. As long as the demand outpaces the supply, the real estate industry will continue to experience growth,” Binay said.

Here are the four factors that drive the property sector in the country:

1.) Political stability. This is a basic ingredient in promoting investor confidence. And foreign direct investment (FDI) has started to flow inward again as companies discover attractive investment options in the country.

The commercial real-estate market (particularly Philippine Economic Zone Authority or Peza-accredited buildings) has seen increased demand in response to this. Key locations like the Subic-Clark Economic Corridor, Bonifacio Global City, Quezon City, Ortigas, Bay Area, Alabang, Cebu, Davao, Iloilo, Bacolod and major tourist destinations like Boracay and Palawan will see major development because of the influx of investments.

2.) Growth in the BPO sector. The latest PWC-ULI report declared that the Philippines has overtaken India as the largest supplier of call center services in the world. This sector now employs about 600,000 and is expected to hit the 1-million mark by 2016. According to investment bank CLSA, the BPO sector is currently responsible for 90 percent of office take-up in the country. The take-up continues to be strong in I.T. Parks where BPO facilities locate.

With BPO employees almost doubling in four years, property investors can further expect good growth prospects in office and residential spaces for BPO businesses.

3.) Overseas Filipino workers. They not only help keep the country’s economy afloat, they also continue to play a major role in fueling the growth of the real estate market. Last year, our country was considered a hot spot for real estate due to the growth in the market brought about by the influx of OFW remittances and their desire to acquire real estate in their home country. The increase in the country’s population and the migration from rural to urban areas has also allowed for more real estate development both for residential and commercial purposes.

4.) Housing. The biggest opportunity for growth in the property sector is in housing. At the end of 2010, it is saddled with a backlog of about 3.6-million units, and as a direct effect of population growth, this number is projected to rise to 5.7 million by 2016.

Though a total of 200,140 units were provided by various government shelter agencies and the private sector from July 2010 up to May 2012 of which 63 percent, or about 127,450, belong to the low-income group, it’s still a long way to go to meet the backlog.

To help members to pursue home ownership that would spur development in the sector, the Home Development Mutual Fund (Pag-Ibig Fund) recently decided to lower its interest rates for the low-income group from 6 to 4.5 percent.

The housing agency also intensified its campaign on the registration of employers and employees as fund members. And as more OFWs were brought into the fund, membership dramatically increased from 8.8 million in 2011 to 10.725 million as of the first quarter of 2012.

In 2011, the Pag-ibig Fund extended P31.5 billion in end-user financing, or the construction or acquisition of 46,300 housing units by members. Since July 2010, it provided a total of P67.2 billion to fund the construction or purchase of 99,172 housing units.

The National Housing Authority (NHA), meanwhile, has provided housing and secure tenure to almost 80,000 families. One of its programs, the AFP/PNP housing program, has built 21,800 housing units in less than a year. It is now on its second phase and is expected to generate 31,200 house and lot packages not only for soldiers and policemen nationwide but also firemen and jail guards. The NHA is also embarking on a P10-billion program annually to provide primarily medium-rise housing for informal settlers living in danger areas in Metro Manila.

The Social Housing Finance Corp., which implements the community mortgage program (CMP), has released P1.29 billion in CMP loans that gave tenure security to 20,975 informal settler families (ISFs) during the period of July 2010 to May 2012. Since the program’s implementation in 1989, CMP’s highest annual number of ISF-beneficiaries at 15,875 was achieved in 2011.