THE 2015 PHILIPPINE REAL ESTATE OUTLOOK
The Philippine real estate industry will be resilient to the weakening of some European markets and economic slowdown in China, even as its 2015 projected economic growth had been revised by the World Bank (WB) from 6.9 percent to 6.7 percent and the Asian Development Bank (ADB) from 6.7 percent to 6.4 percent. However, the International Monetary Fund (IMF) maintained its Philippine economic growth forecast at 6.2 percent, a growth rate that is expected to be among the highest, if not the best, in the ASEAN region.
Slow Start in Q1
While the nation experienced a slow start during the first quarter of 2015, due partly to the government’s lower spending, increased inflation, monetary tightening measures and the lingering effects of super typhoon Haiyan (Yolanda), the nation’s economy was, however, able to recover during the second quarter of the year, even as the global economy has a bleak growth forecast of only 3.3 percent this year.
The country’s recovery was the result of its improved export, strong private consumption and increased investments. The Philippines was not the only country to feel the impact of the global economic slowdown, major economies in the ASEAN region suffered the same fate as well.
Philippine Real Estate Property Outlook
Despite the country’s slow start in 2015, its substantial recovery during the second quarter of the year and the projected increase in remittances from millions of Filipinos all over the world, make the country’s property market a vibrant investment choice.
Metro Manila’s central business districts have seen a lot of transformations. Its landscapes are now dotted with high rise property developments, which continue to attract local and foreign investors. Boosted by a strong demand for residential, office and investment properties, developers are virtually competing for the limited lots suitable for high rise property development projects in prime locations in Metro Manila and other key cities in the country.
The country’s property market update for the third quarter of 2015 reflects high investor confidence, resulting in the industry’s projected positive growth. The office market is seen as the most sought property among all asset categories. But the residential market remains bright, although property buyers are shifting to the lower segment category. The sustained flow of remittances from overseas Filipinos, booming IT-BPO industry, increased tourist arrivals and growing domestic demand will push property sales in the country up this year and the coming years.
The Office Market
In the country’s Central Business Districts (CDB), the single digit vacancy rates and the growing demand for office properties will eventually result in office property shortage, if it is not yet felt today. The office market performed well during the third quarter of 2015, and this upswing is expected to continue till the end of the year, including the coming years.
This would eventually put pressure on the prices of office properties, raising its prices as demand for office rentals in prime CBDs are expected to continue, although it would be at a conservative pace. With the country’s major CBD’s like the Global City, Makati and Ortigas now almost filled to the brim, investors and developers can start looking at other potential growth centers for their property investments.
Residential Real Estate
The demand for residential properties will remain high. The third quarter property update showed a slight increase in average rental rates. But there has also been a shift in buyer and investor choice from luxury residential properties to the middle and lower segments. The growing middle income market will help sustain the demand in this segment. This market class, however, will focus mid-cost options. The entry of foreign investors and developers in the country’s property market should serve local property developers the signal to be competitive, especially in the residential market, where it is expected to sustain its high demand.