Philippine property market attracts Asian investors

By Adrian Bishop, Editor, OPP Connect
Twitter: @oppnews

With rising demand, capital growth and rental yield, the Filipino real estate sector is drawing more interest from foreign buyers, and is set to boom, say market commentators

The Philippines property sector is seeing strong interest from overseas investors and developers as prices, yields and demand all grow, say industry experts.

Both the residential and commercial sectors are expanding as the Philippines market draws interest from Asian buyers, with one commentator saying nothing short of economic disaster will prevent the sector booming.

Yeli Camus, Assistant Manager for Residential at leading global agent JLL in the Philippines, tells OPP Connect, “We have a good mix of foreign clients/investors in residential including British nationals, but the majority are from our Asian neighbours like Korea, Singapore, Japan, Chinese and India. Some of them look for investments good for a 10-year period. Recently we had some inquiries from Malaysian clients as well.”

And Henry Cabrera, Head of Capital Markets,  JLL Philippines, says, “There is strong interest from foreign developers and investors to acquire commercial property in Metro Manila particularly in Makati and Bonifacio Global City, which are the country’s premier central business districts.

“Both groups are looking for development opportunities in residential condos for sale or office space for lease. Most of these groups come from Japan, Hong Kong and Singapore. We are, however, starting to see interest coming in from Thailand, Malaysia and Indonesia.”

The Philippine economy is performing well

The Philippine economy is performing well

JLL forecasts in its 2014 Q1 Asia Pacific Property Digest that Manila residential rental and capital values are set to keep rising. “Residential leasing and investment demand is expected to remain healthy in the next 12 months, supported by the projected positive performance of the local economy and the O&O sector. Consequently, positive demand is likely to buoy rental and capital value growth moving forward.

“Around 8,300 units from 14 developments are forecast to complete in the remaining quarters of 2014. The majority of upcoming developments are located within Makati CBD and its surrounding vicinity and the large incoming supply is expected to drive up vacancy rates.”

Similarly, pre-selling residential developments are experiencing positive sales take-up and the sustained performance of the investment market has prompted developers to continue launching new projects, the report says.

The country’s top real estate developers are spending close to Php400billion this year, reinforcing the market’s strong economic fundamentals and in preparation for the ASEAN economic integration by 2015, the Philippine Star newspaper reports.

Pinnacle Real Estate Consulting Services, says leading developers are increasing their capital expenditures to fast track their projects and the market is active, with plenty of buy-to-let opportunities

“The on-going handover of various housing and condominium units to the individual buyers this year would show the depth of the residential market. Mid-market and affordable residential units are typically for “end-use”, although there is a marked sales pitch of “investment opportunity” in recent years,” according to its latest Philippine Real Estate Market Insight study.

“In the past, only the high-end and upper-mid market segments have strong leasing activities. This will continue with rents between Php50,000 to Php100,000 per month for upper-mid condominium units, while rents of above Php100,000 per month for high-end, depending on the sizes. Luxury condominium units would command rents north of Php250,000 per month.

“Given the low savings rate of the banks, condominium units have been marketed as investment opportunities with projected rental yields of 5-8%. The budding dilemma of the overseas Filipino buyers, who comprise a significant segment, is that they would typically want to use their units anywhere between one to six months when they are staying in the country, and only lease out their units when they are abroad.

“This would obviously impact on the potential income of their units, as well as the challenge of findings tenants during their “abroad time”. Some developers have been offering “serviced residences/units” or condotel operations to address this pattern.”

Filipino businessman and politician, Manny Villar, says he believes the Philippine real estate sector is set to boom. “I am so bullish about the real estate industry that I can say this – that, except for a dramatic decline in economic growth, I don’t see anything that will stop the growth of the industry.

“This view may contradict those who feel that the industry, after years of continuous growth, has already reached its peak and is headed for a decline. Such concerns are based on a narrow perspective, which compares the real estate industry with itself,” he tells the Tempo website.

Viewed from an Asian perspective, the Philippines market still lags behind Malaysia, Thailand, Singapore, Hong Kong, Beijing, or Shanghai. “Comparing the Philippines to these places, in terms of real estate, makes us feel really a Third World country.”

But the Philippine market is catching up, boosted by low interest rates, manageable inflation, and a strong economy, and is attracting overseas demand, he says.

“The real estate industry, too, continues to benefit from investor confidence, which helps attract foreign investments despite uncertainties in the global economy.”

The central bank, the BSP (Bangko Sentral ng Pilipinas) – says that net inflows of foreign direct investments (FDI) surged to US$597million in April 2014, four times higher than the US$149million recorded in April 2013. For the first four months of 2014, net FDIs totalled US$2.4billion, up 9.1% year-on-year.