Tuesday, February 12, 2013
Bright 2013 Forecast for Philippine Real Estate Industry
Buoyed by its impressive 2012 performance, leading real-estate service provider and advisory firm CB Richard Ellis (CBRE) Philippines is bullish on the continued growth of the real-estate industry this year and beyond.
This trend, according to the company, is apparent since the Philippines has been experiencing the best real estate market over the last 20 years.
In 2013 no slowdown is seen as investment upgrade of the country will help attract more investors in the real estate sector.
“The confidence in the Philippines from an investment standpoint is very high,” said Rick Santos, who is the chairman, founder and managing partner of CBRE Philippines.
This, he attributed to strong macro-economic fundamentals, renewed confidence in the country’s leadership, world-class Cabinet, record low-interest rates and high annual office take up of the business-process outsourcing (BPO) sector.
Santos also pointed out the gaming sector taking off like Macau and Singapore, record tourist arrivals, influx of budget airlines, high remittances, strong currency, huge interest in the mining sector, improved relations of the country with the United States, and the Philippine stock market at an all-time record level as the other underlying factors that make the country attractive.
Among the sub-sectors of the real-estate industry, both the residential and office segments are expected to benefit more on strong demand from a broader market this year in and onwards.
Democratization in the Housing Sector
Unlike in the past recent years, more and more Filipinos can now afford to buy their own houses to dwell on.
With this trend, Santos said “the Philippines is experiencing democratization in the housing sector—from a nation of renters to owners.”
The growing number of people owning a home is mainly due to the decreasing rates on interest, as well as the affordability of housing loans available in the market.
Lending rates offered by the banks today continue to be on the downward trajectory, thus keeping the liquidity in the financial system.
Given the liquidity in the market, developers are capable to provide more affordable payment terms to buyers.
This, in turn, leads to a strong demand in the residential sector.
Housing ownership in the country has been democratized by the single digit mortgage rate.
In most cases, monthly rent for a typical housing unit in Metro Manila is currently at par with house and lot or residential condominium products now available to a broader market base.
CBRE Philippines estimates that 300,000 households in Metro Manila can afford a condominium unit priced at least P1 million.
Approximately, 27,800 units of residential condos were taken up last year. Such figures represented 167 projects in Metro Manila.
Condominium projects are fast becoming the preferred residence of the majority of Filipino household at present because of their unique “live, play, work” environment proposition.
With this market preference, the demand for affordable condominium unit is projected to grow annually.
Hence, property developers are now shifting to the development of reasonably priced condominium projects in the Metro to cater to the growing population who are empowered by the economy to own their abode.
More Space for Office Sector Growth
AMID the global economic downturn, the Philippine office sector remains resilient.
“The Philippines is becoming the lifeboat for many US and European companies that need to outsource in order for their businesses to survive and actually preserve jobs back in the US and Europe. We see a return and rapid expansion of US and European MNCs to the Philippines,” noted the CBRE chairman founder and managing partner.
Demand is noticeably catching up with supply in the major business districts in the country, where the needs for office space are on a steady uptake sans signs of a slowdown.
In fact, average occupancy rates in these areas hovered at 96 percent during the first quarter.
The demand from the sustained growth of the outsourcing and off-shoring industry plus the limited tenant turnover keep on putting a pressure on the already tight supply situation.
While new supply of traditional and BPO office space is set to come online in the second half of this year, it still won't alleviate the supply situation.
From the estimated 583,000 square meters of the projected new supply this year, about 130,000 square meters have already been pre-committed by end of 2012.
The limited supply constantly put an upward pressure on office lease rates.
“Pre-leasing is back!” said Santos. “The office sector goes from strength to strength, with a surge of pre-leasing commitments in the central business districts.”
Meanwhile, despite the increase in rental rate in the second quarter of 2012, Metro Manila has outperformed 18 other central business districts.
“The office sector will continue to perform well in Asia Pacific as it is one of the most cost-effective outsourcing destinations in the region,” Santos stressed.
By Business Mirror