2014 will end on a high note for the country’s real estate industry and it seems that the consistent upward trend will go on to 2015. Property developers and analysts have kept a positive outlook and foresee that the year to come will be another exciting one for the real estate industry. The ASEAN integration, the investment upgrade, and the swelling demand from BPOs and OFWs are considered major factors in strengthening and buoying the real estate market in the coming year.
The country is already a relatively attractive investment choice due to low rental rates compared to our neighbors in Asia, but new and old CBDs (central business districts) will get a significant boost because of the recently achieved investment upgrade. This recognition gives confidence to multinational corporations who are looking to invest and branching out in the country. BPOs in particular, are filling up office spaces the most.
It is also expected that the ASEAN integration will do wonders for the office real estate sector, as corporations from countries such as Hong Kong and Singapore will be branching out to the Philippines. The main challenge for the office market next year would be how to keep up with the demand when more international and ASEAN companies begin seeking properties in the country.
For 2015, a fresh batch of supply is being developed and a significant number of units will be turned over within the year. As of the end of 2014, there are already several corporate plazas and buildings that are either pre-selling or are ready for turnovers in Ortigas, Makati and Taguig. Business hubs are also being developed in areas outside Metro Manila. These business hubs are vital in spreading the economic growth throughout the country. Palayan City, for instance, is slated to become the next business hub in Central Luzon. The newly inaugurated hub in Nueva Ecija will cost P1.5 B to develop and will generate 13,000 jobs.
This year, the kings of malls, SM, Ayala, and Robinsons have continuously upped the ante by expanding and updgrading many of their already world-class malls. More international brands are finding their way in the country and the most notable international brand expansion this year is H&M’s opening in malls late 2014. Much like the office real estate sector, the ASEAN integration will rake in more brands that will invest and put up their branches within the country, and no doubt will the three top conglomerates be able to accommodate the new arrivals.
Other players are also planning to step up their game in 2015. In particular, Puregold and Manny Villar’s Vistaland plan to invest billions of pesos to expand their retail businesses. The former plans to invest 3.5 billion, while the latter will be spending P15 billion in the next five years. When asked why he decided to focus on retail, he said: “I foresee exponential growth in consumer spending with the rise of the middle class in the Philippines in the next five to 10 years. Look at the phenomenon of affluent and expanding middle-class spending in China, Thailand, Indonesia and India — that is happening here with our continued growth on OFW remittances, BPOs and steady economic growth.”
Though there have been talks of a property bubble looming in the country, the issue seems to have passed for now due to the sky-rocketing demand coming from low- to mid-income markets. Buyers from this bracket are purchasing properties as end-users, not as investors. Driving this demand are OFWs who are either planning to settle back in the country, or are purchasing for their family members.
In addition to the increasing demand which is keeping this sector buoyant, the BSP recently announced that they will be releasing a housing price index in 2015 to prevent the property market from overheating.
Real estate companies are also starting to focus on the outskirts of CBDs and NCR (national capital region), with Cavite, Bulacan, and Laguna being hotspots for new low- and mid-income homes. Many of these companies, including those leading in the industry, have also pledged to close the gap between housing demand and supply. By 2016, the SHDA (Subdivision Housing Development Association) plans to reach 1 million houses. Currently, the housing backlog has reached 3.9 millionand it is projected to reach 5.6 million by 2030.
More townships will also be in development in 2015. Real estate giants Megaworld and Ayala are already working on their own large-scale projects that will build communities complete with business/office and commercial areas for residents. Altaraza, Arca South, and Uptown Bonifacio are just some of these emerging townships.
With the year ending on a positive note, we can expect the real estate industry to be more robust in 2015. However, there are still existing possible threats that could hinder the potential growth of the sector. Last week, there was mention of how the increasing congestion and traffic in Metro Manila is stifling the growth of the economy and the real estate industry, and that the government must act quickly to improve the country’s infrastructure.
Real estate analyst Urban Land Institute, in its Emerging Trends Asia Pacific 2015 report, ranked the country back to eighth place both in development and investment. Previously, the Philippines was ranked fourth place in investment, and eighth in development. The drop in rank is due to issues in government transparency and policies regarding foreign ownership in land. The report also cited poor infrastructure.
Also, while the bubble is said to be non-existent, the BSP must be prepared to create policies that can be implemented immediately and effectively once signs of the market overheating appears.
If all goes well and as expected by property analysts, business may very well be booming as usual in the country. However, it also seems that the government will have a heavy role in securing that success next year. While the BSP is ready to act should the market overheat, it is crucial that other government departments in charge of transparency and infrastructure be efficient in prepping the country. The players of the real estate field are ready for year 2015 and for now, the ball is in the government’s court.
Thumbnail photo from Mark Harkin/Flickr.
Manila Bay photo from eralviz/Flickr.