Real Estate Investment: The Philippine Market in 2016
- Lamudi
- Oct 30, 2015
- 3 min read
The real estate market continues to be beneficial to investors despite slower-than-expected economic growth this year.
Driven by last year’s strong finish, where the Philippine economy posted an overall growth rate of 6.1 percent after stumbling to 5.6 and 5.3 percent in the first and third quarters, many expected 2015 to begin in the same way that 2014 ended.
Unfortunately, the national economy only grew at a rate of 5.2 percent in the first quarter of 2015, and 5.6 percent in the second, causing experts to lower their end-of-2015 forecast to around 6 percent. This is a significant change considering international organizations like the International Monetary Fund and JPMorgan had initial forecasts of 6.7 and 6.4 percent, respectively.
Despite the turn to less gaudy numbers, the local property market continues to thrive, and investing in real estate remains safe and ideal for the remainder of the year and for the foreseeable future.
Benefit from the Continued Entry of BPO Firms
Business process outsourcing (BPO) firms continue to pursue office space in the Philippines’ high-profile commercial areas, thanks largely to the country having some of the more competitive rental rates in the Asian region and having a very attractive and highly skilled local workforce. Several experts do not foresee the supply of office space surpassing demand soon, still making it a beneficial investment in 2016.
Apart from the BPO companies’ direct need for real estate, investors can also look to benefit via renting out to traditional offices and commercial and retail establishments looking to take advantage of the opportunities provided by the market comprised of BPO employees.
BPOs have also increased the demand in residential properties. Expatriates and high-income earners are buying or renting high-end and luxury condominiums in and around central business districts. With the BPO sector workforce also expected to double next year and revenue from the industry to surpass remittances from overseas Filipino workers (OFW), now is a better time than any to invest in rental properties in the cities where these companies are based.
Continuous Appreciation of Land Value
Despite slower GDP growth in 2015, land values still continue to appreciate, albeit in a matching slowed pace. A report by global real estate consulting firm Colliers International shows that growth rates of land values in Metro Manila accelerated in the second quarter of the year. Land values in the Makati central business district, growing at only 0.85 percent during the first three months of the year, rebounded in the next three by growing at 2 percent. This raised its average price to Php452,704 per sqm.
Values similarly rose in the business districts of Fort Bonifacio and Ortigas Center, increasing at 1.97 and 2.1 percent, respectively. While the rise in value makes for higher prices, the demand in these areas and similarly well-known CBDs also remains high. Deciding to invest in real estate in these areas allows one to hold property and sell later on when the value has risen, or rent out to individuals or entities who are in need of space but prefer not to buy.
Growth in Rural–Urban Fringe Areas
Rural–urban fringe areas, otherwise known as outskirts, are best described as the locations where the urban and rural transitions into each other. These places are commonly used for properties or structures that require a significant amount of land, like airports, factories, and industrial estates.
While the incessant demand from the BPO industry and other business entities continues to result in an increasing demand for workspace, there is simply a lack of developable land in established CBDs, and even several residential areas.
With that, developers have begun exploring rural–urban fringe for development, embarking on mixed-use projects to be able to meet commercial, industrial, and residential needs. Examples of these include the Arca South in Taguig, Nuvali in Laguna, and the Mactan Newtown in Cebu, among others.
The growth in these fringe areas is projected to constitute more than a third of the annual new office supply on average for the next three years alone, indicative of the increased importance these locations have for local real estate, and making them very beneficial to those investing now or in the next year.
Source:
Comments