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As the year slowly draws to a close, we take a look at some of the biggest Philippine real estate news of 2016
While triumphant for some and tumultuous for others, most will agree that 2016 has been a year full of many interesting events. Philippine real estate is no exception, as the industry continues to navigate between problems and progress each year.
While some of the proceedings in local real estate have yet to play out before they are deemed a hit or a miss, it is clear that 2016 has been a monumental year in terms of how it has shaped the industry.
NEW LEADERSHIP, NEW APPOINTMENTS
Undoubtedly the most significant news in 2016, the election of now Philippine president Rodrigo Duterte last May has been highly influential. As with all new administrations, new appointments were made to fill the president’s Cabinet, with some heading major agencies that directly oversee the real estate sector.
Vice President Leni Robredo Appointed as HUDCC Chief
Shortly after being inaugurated as the Vice President of the Philippines, Maria Leonor “Leni” Robredo was offered, and subsequently accepted, a place in Duterte’s Cabinet, specifically to serve as the head of the Housing and Urban Development Coordinating Council (HUDCC). This marks the third time the organization has been headed by the vice president, with Robredo following immediate predecessors Noli de Castro and Jejomar Binay.
Since her appointment, Robredo has mainly focused on addressing the almost 5.7-million-unit socialized housing backlog in the Philippines, starting with fast-tracking housing for the victims of 2013’s Typhoon Yolanda. Robredo is also establishing an anti-poverty program rooted in her twice-weekly visits to the poorest of the poor local government units (LGUs) in her first 100 days as vice president.
(Editors’ note: Vice President Robredo tendered her resignation as HUDCC Chief and effectively as member of Duterte’s cabinet on December 5, 2016.)
Former Crown Asia President Becomes Public Works and Highways Secretary
Recently reelected Las Piñas Representative Mark Villar was assigned to the president’s Cabinet as the secretary of the Department of Public Works and Highways (DPWH). Villar eventually resigned as Las Piñas Representative to focus on his responsibilities with DPWH. His wife, DIWA Representative Em Aglipay-Villar, was designated as the “caretaker” of the Las Piñas district he vacated.
The appointment is notable, and to some extent was seen as conflict of interest by some critics, as Mark Villar is the son of incumbent senator Cynthia Villar, and Vista Land & Lifescapes president and CEO Manny Villar. The current DPWH chief was once the president of real estate developer Crown Asia, one of the companies under his family’s Vista Land conglomerate. Apart from Vista Land, the Villar family also owns shopping-center developer Starmalls Inc.
Century Properties CEO and Appointed as Special Envoy to the USA
Jose E.B. Antonio was appointed by Duterte as special envoy to the United States. Antonio is mostly known for being the founder, CEO, and president of Century Properties Group Inc. He also served as a special envoy with the rank of ambassador to China in 2005, establishing the Philippine-China Business Council.
While Antonio’s stature in real estate and experience with the business community abroad make for a noteworthy appointment, this was also seen as a potential conflict of interest, at least for Donald Trump. This is because Antonio is also technically a business partner of the recently elected U.S. president. Century Properties paid at least $5 million to use the Trump brand on its condo tower in Makati, one of at least 10 licensing deals the president-elect has around the world, according to a report by Bloomberg.
SOCIALIZED HOUSING AND LAND CONVERSION
Socialized housing was one of the concerns immediately addressed by Robredo and the HUDCC, with the right partnerships from the private sector and a greater allotment from the national budget seemingly being the key elements to satisfying the housing backlog.
Socialized Housing Backlog Billows at 5.7 Million Units
During the first Housing Solutions Congress organized by the European Chamber of Commerce of the Philippines last August, stakeholders and government officials detailed how many houses would have to be built every day to quell the backlog. At least 2,600 homes would have to be constructed every day for the duration of the Duterte administration in order for the 5.7 million housing backlog in the Philippines to be substantially addressed before the president ends his six-year term.
During a budget briefing of the HUDCC, Robredo presented data citing how the government’s construction of homes has averaged only 200,000 per year. This is because the public housing sector is allotted less than 1 percent of the national budget on average. During the Housing Solutions Congress, she noted how tax breaks would encourage private real estate companies to build low-cost housing for the poor, admitting the government could not address the backlog alone and would need the help of the private sector.
Major Developer Partners with Industrial Giant for Housing Venture
In what can be seen as a contribution to addressing the housing backlog, Antonio’s Century Properties has partnered with the global business enterprise Mitsubishi Corporation to develop horizontal housing units in Cavite that are geared toward first-time homebuyers. The former has reportedly secured a 26-hectare property in Tanza, Cavite, to develop around 4,000 homes. This project is Century’s initial foray into affordable housing.
In 2015, Mitsubishi Corporation and Century Properties, via Century City Development II Corporation, embarked on a joint venture. This was for the development, leasing out, and maintenance of the world’s first Forbes Media Tower in Makati. Mitsubishi joins U.S. president-elect Donald Trump, hotel-heiress Paris Hilton, and luxury-designer Versace Home among high-profile companies and personalities who have collaborated with Century Properties.
Government Plans ‘Modified’ Land Conversion Moratorium
In early September, the Department of Agrarian Reform (DAR) submitted a proposal to impose a two-year moratorium on the conversion of agricultural land. This was subsequently approved by Duterte; disallowing the conversion of agricultural land to non-agricultural uses is intended to support the country’s food security program, many of its proponents claim. However, the move was opposed by Duterte’s economic managers, led by the National Economic and Development Authority (NEDA) and Robredo’s HUDCC.
At the Philippine Development Forum, NEDA Director General and Socioeconomic Planning Secretary Ernesto M. Pernia said: “We economic managers, including the Vice President, have made observations and we opposed that policy or program. But of course, we have to compromise with the other members of the cabinet.”
The compromise reportedly refers to the modification of the Executive Order on land conversion. This will “take into account our contributions in terms of the impact of the land conversion [on] infrastructure development, which will require [the conversion of] certain lands for infrastructure as well as for housing and non-agri enterprises.”
Philippine real estate also saw a great deal of financial movement in 2016. While trends already occurring within the property sector influenced the movement, events and changes that happened as a result of the recent elections in the Philippines and the United States are also seen to have contributed.
Real Estate Loans Increase for Philippine Banks
The Bangko Sentral ng Pilipinas (BSP), through its own data, reported that the total real estate loans (RELs) for banks in the Philippines rose 19.2 percent year-on-year at the end of the third quarter of 2016. The RELs by September of this year is said to have reached Php1.19 trillion, increasing from the Php999.46 billion during the same period in 2015. Commercial RELs amounting to Php893.77 billion made up the majority of the loans accounted for to date, while the rest were Php297.67 billion residential RELs.
The BSP also reported that as of the second quarter of 2016, the residential real estate price index (RREPI) rose by 11.3 percent to 122.8 from the 110 reported for the second quarter of 2015. The data shared by the BSP also showed that real estate prices in areas outside the National Capital Region (NCR) posted a faster rate in the second quarter at 125.7 against the 117.8 in the NCR.
BOI-registered Investment Continues to Rise
According data from the Board of Investments (BOI), the value of investments approved by the government agency from January to November of 2016 is at Php324.5 billion, which is up by 35.5 percent from the Php239.52 billion registered for the same period in 2015. November of 2016 alone has seen a massive increase, 97 percent to be exact, with big-ticket power and petrochemical projects accounting for most the Php28.5 billion registered for the month.
Real estate activities accounted for Php48.953 billion of the investments totaled for the first 11 months of this year, which is inclusive of mass housing. Construction also accounted for a sizable amount, with Php62.273 billion worth of investments approved. Trade Secretary and BOI Chairman Ramon Lopez has reportedly gone on record to say that the agency expects that the entirety of approved investments pledges in 2016 will be 10–15 percent more than the Php366.74 billion in 2015.
Peso Depreciation May Increase Residential Demand from OFWs
As many feel wary about the peso weakening to an intraday low of Php50 to the U.S. dollar last November 24 and how the trend will seemingly continue for the foreseeable future, real estate consulting firm JLL says that this may actually benefit the residential property market as it could lead to a stronger demand driven by the higher spending power of overseas Filipino workers (OFW).
In a report, JLL noted that excluding potential demand from overseas Filipinos due to the peso’s depreciation, it also sees demand for residential properties driven by investors in the coming quarters. This demand for residential properties is reflected in the BSP’s RREPI, which reported that residential property prices from April to June of 2016 increased by 11.3 percent from the same period in 2015.
Major Developers Rein in Spending, Reduce CAPEX for 2016
SM Prime Holdings Inc., which opened its 60th mall in East Ortigas, Pasig, in December, indicated in its third quarter financial report that it expected to incur a capital expenditure of (CAPEX) of Php45 billion in 2016, or 25 percent lower than the Php60 billion it announced earlier in the year. SM Prime has 27 residential developments under its condo brand SMDC, mostly in Metro Manila, and launched three projects with 6,000 units in the first nine months of 2016, with 4,500 more intended to be launched in Pasay, Quezon City, Parañaque, and Bulacan province.
Ayala Land Inc. has said that it expected to finish 2016 with a lower CAPEX than earlier anticipated. In an analysts’ briefing, the developer shared that its CAPEX stood at Php63.9 billion at the end September, of which 40 percent was spent on residential projects and 27 percent on commercial leasing projects. In the same briefing, Ayala Land said it registered a net income of Php15.06 billion from January to September, 17 percent more than from the same period in 2015.
Sources: hudcc.com.ph, jll.com.ph, bsp.gov.ph, thestandard.com.ph, smprime.com, manilatimes.net, business.inquirer.net, new.abs-cbn.com, philstar.com, bloomberg.com
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