The Bright Picture
Be bullish on the realestate market; you’ve got the numbers backing you up
David Leechiu, CEO of his eponymous company, presents facts to back his bullish outlook on the market
Here is good news: the Philippine property market is one of the few in the world where demand is still growing.
It is no big secret that we at Leechiu Property Consultants (LPC) have taken quite an optimistic view of the Philippine real-estate industry throughout these challenging times. But numbers do not lie; our studies have consistently shown that it is one of the most resilient markets in the world. Let me support our outlook—with hard data.
Last quarter, office demand was the highest it has been since the start of the pandemic. The first half of 2021 posted 291,000 sqm or 75 per cent of last year’s demand. Even more significant is that the BPO industry accounted for 92,000 sqm or 54 per cent of the second quarter of 2021 take-up. This translates to a remarkable 160 per cent increase from the first quarter’s 35,000 sqm. Our numbers show that outsourcing to the Philippines remains a viable business strategy to reduce operating costs for US-based companies. With this growth comes an increase in employment in the country.
Outside Metro Manila, provincial office markets now have a golden opportunity to attract more companies searching for new labour segments as they de-risk from a concentration in the metro. Consequently, many provincial capitals are experiencing an unprecedented construction
boom attributable to IT-BPM firms and tourism. Currently, there are over 119 IT parks and mixed-use developments or approximately 134,000 hectares of masterplanned communities across the nation. More are being planned through the assistance of IT & Business Process Association of the Philippines’ (IBPAP) Digital Cities project. LPC remains one of the key movers of this undertaking which identifies new expansion areas for BPOs and related firms in cooperation with local government units and real estate players.
Following months of home confinement during the lockdowns of 2020 and the resurgence of Covid in 2021 particularly in the business districts, the concept of Work From Home (WFH) remains a hot topic. Last year, we discovered the benefits and challenges of home-based work. While employers implemented this to address the health crisis, they are also studying how working from home can be more productive and better balance family time. In the next six months, many companies will be figuring out the right proportion between home- and office-based employees.
The residential market saw declines in buyer and developer confidence at the start of the pandemic. Still, it has in large part recovered and continues to do better even after 18 pandemic months. Condominium prices in BGC have reached as high as PhP750,000 per sqm, while Makati’s maximum price level has hit PhP660,000 per sqm. Pricing in Davao and Metro Cebu has also reached Metro Manila levels ranging from PhP314,000 to PhP370,000 per sqm. As the residential condominium market continues to improve, we are likely to see more launches in the second half of 2021.
The prices of land in the premier and most exclusive residential enclaves of Forbes and Dasmarinas Village have held at PhP420,000 to PhP450,000 per sqm. while vacant lots in Ayala Alabang in the South have been closing at record high prices of over PhP175,000 per sqm, an increase of about 17 per cent more than pre-Covid values. Even properties in Nasugbu gated resorts have risen by an average of 214 per cent, as interest in second homes continues to increase due to Covid restrictions. In Peninsula de Punta Fuego, lots selling in 2020 for as low as Php12,000 to PhP60,000 per sqm increased by 2021 to PhP20,000 to PhP100,000 per sqm depicting the appeal of seaside homes. We expect that prices will continue to further rise with the completion of new infrastructure projects such as the Cavite-Laguna Expressway (Calax) which will cut travel time from the metro to this region.
Reforms in the corporate tax system and related matters have also made the Philippines more attractive to BPOs, corporates and other real estate occupiers. We owe much to Secretary Carlos Dominguez for his fantastic fiscal management which pushed this country through this crisis. The pandemic was unexpected, but the government’s game-changing reforms were executed decisively and swiftly; thus, our macroeconomic fundamentals remain.
In the last 20 years, the Philippines has been a champion of growth. It has done well despite the many disasters, calamities, and financial crises that have come its way. The rise of OFW remittances, BPO jobs, cement consumption due to demand from construction, tourism arrivals, the steady stock market and per capita income are evidence of the country’s resilience. From landslides, calamities to political conflicts, everything has been thrown at the Philippines, but we continued to grow. More and more wealth has been generated in the last two decades, which allowed the country to face Covid head on.
WHAT’S NEXT?
Tourism. Due to the proactive measures of the Department of Tourism (DOT) to maintain Philippine tourist spots as “Covid-free” destinations including subsidising the testing of tourism workers, we saw a strong recovery as restrictions eased. The second quarter saw visitors return to Amanpulo and Boracay, and many more travel spots across the country. Several local and foreign influencers have also been very instrumental in promoting the Philippines. With their social media following in the thousands and even millions, renewed and heightened interest in the country has been unprecedented. We have never had this before, not to the scale that we do today. As soon as the gates open, tourism will be back with a vengeance.
As the vaccine rollout improves, the light at the end of the tunnel grows brighter. The amount of progress we have made as a nation to collectively fight the crisis shows unprecedented capital and thinking power at work. Economic recovery is happening, and with cautious optimism, we will make it through this pandemic and its aftermath.