Experts: Positive forecast for real estate industry in 2020
As the country’s real estate sector prepares to end 2019 on a positive note, experts agree that 2020 will be another vibrant year for the Philippines, with its young and talented population and consumption driven economy primarily driving growth. GDP grew by 6.2 percent in the third quarter, while household final consumption expenditure increased at almost the same rate by 5.9 percent.
“The Philippine real estate market will continue to see expansion in 2020 across all sectors – commercial, residential, and industrial. Economic growth and investment sentiments towards the Philippines remain optimistic, and we expect that to be a source of growth for next year and thereafter,” said Rick Santos, chairman & CEO, Santos Knight Frank.
Santos led the panel discussion during the Urban Land Institute (ULI) Philippines’ launch of “Emerging Trends in Real Estate Asia Pacific” report on Nov. 27. The panelists included Buds Wenceslao (chairman of ULI Philippines and CEO of D.M. Wenceslao & Associates Inc. Parañaque), Raoul Villegas (Deals and Corporate Finance executive director of PwC Philippines),
Leonardo Po (EVP and treasurer of Arthaland Corporation), and Reginaldo Anthony Cariaso (head of Strategy, Products, and Support of Bank of the Philippine Islands Inc.).
The real estate sector in the Philippines is also likely to benefit from the movement of capital from neighboring countries and territories.
“With the protests in Hong Kong and geopolitical concerns in Asia, Europe, and the US, we also expect capital flows to divert to the Philippines,
which is seen as a safe haven for investments,” added Santos.
Santos’ statement was supported by Villegas who said that “2019 has been a very good year and 2020 will continue that trend. I see a lot of foreign capital that comes in whether they are coming in from strategic investors or private equity funds.”
“Domestic capital also wants to invest. They are very specific about what industry they want to be in: pharmaceutical, healthcare, logistics, real estate, education, financial services. It is a growth play, a demographic play. All direct investors want to be able to take advantage of our 105 million strong population that is growing by 1.8 percent per year.”
Growth sectors
According to the panelists, the young urban talent pool in the Philippines will continue to fuel the growth of the BPO sector (office) and the demand for affordable housing (co-living) and convenient access to food and necessities (retail).
“Manila’s office sector continues to be in demand from the likes of Philippine offshore gaming operators to BPO tenants who have been able to fend off the threat posted by the evolution of AI-based solutions,” said Wenceslao.
With strong demand, construction of new office space in Metro Manila continues. Around 1.2 million sqm. of office space are in the pipeline between Q4 2019 and 2021 in Metro Manila.
In addition, strong consumer confidence in the country affects other sectors such as industrial real estate.
“The working population is not only your labor force, but it is also the one increasing productivity and our GDP. They are also consumers and the source of demand that drives the growth of logistics,” Villegas explained.
Meanwhile, local appetite for luxury apartments puts prime residential among the sectors to watch in the succeeding years. Knight Frank’s Prime Global Cities Index Q3 2019 ranked Manila as No. 1 in Southeast Asia in terms of luxury residential performance.
“Manila’s strong performance is driven by a variety of factors, such as tight supply and a high level of demand from local high-net worth buyers. Knight Frank’s The Wealth Report forecasts that the number of ultra-high net worth individuals in the Philippines will increase by 38 percent between 2018 and 2023 – the world’s second-largest growth only after India,” said Santos.