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Steady growth is a clear manifestation of how the real estate sector has been keen and dynamic in addressing issues hounding the Philippine market. Colliers noted that while there was a slower growth rate for the property sector in 2018, other segments such as office, residential, and leisure remained poised for record-high supply and demand.
What these real estate industry key players are doing in terms of addressing major issues is interesting to know, whether you are a real estate broker or a property buyer. It helps you understand some of the factors affecting the development, the pricing, and even the “why’s” of the project.
Issues in the Headlines
There was a number of issues in the real estate industry’s macro environment that constantly made the headlines. Inflation soared in 2018 to a high of around 6%, which is a relatively shocking number if you compare it to the figures from the previous five years. 2013 to 2017 registered an inflation range of 0.7 to 3.6%. The most recent 2019 data reveals that inflation has eased to 3.6% as of May, but still you hear a lot of people complaining about soaring prices of basic commodities and the rising cost of living.
High inflation rates further cause interest rates to go up, making it difficult for borrowers because of increasing mortgage cost. Add to this the weakening peso, which has an average exchange rate of 52 pesos to the dollar. And, as you see on the news each day—there is also the constantly rising prices of fuel. On the side, you see political bickering and intrigues sharing the headlines on issues like graft and corruption and Duterte’s war on drugs. Of late, a lot of conflicts among various groups have been stirred following Duterte’s close relations with China which have given rise to issues like territorial claims and rights.
Other issues remain unsolved such as the traffic congestion in highly urbanized areas like Metro Manila, flooding, rising urban population, and of course, poverty. While the government tries to put in place certain programs to address these perennial issues, still there is a lot that needs to be done.
Responding to the Issues
While some of these issues are external to their business and beyond the control of real estate developers, it is noteworthy to investigate some of the things they have done to address such concerns.
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Use of Technological Innovation
In a round table held by online real estate portal Lamudi with property developers, it was pointed out that the latter’s ability to use technological innovations gets the industry moving despite hurdles. Anchor Land’s President Elizabeth Ventura expounded on this by explaining that aside from using the internet to educate clients about their projects, their developments are now based on feedback and information they get from these clients. Such feedback mechanism helps them plan and improve their developments and what these have to offer.
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More Flexibility
Colliers cannot be more direct in assessing what needs to be done amid the issues confronting the Philippine property market with its declaration that in 2019, flexibility will be the name of the game. It reiterated the looming challenges considered as threats to the industry—rising interest rates that will directly affect low to mid-income residential demands, a high inflation curtailing consumer spending, construction delays due to shortage in skilled manpower, and uncertainties related to the implementation of the second round of the Comprehensive Tax reform program.
One example of this flexibility by real estate developers can be seen in recent changes in payment terms such as the offering of more affordable payment options like the zero interest down payment, extended in-house financing options, and others.
With PAGCOR’s issuance of 51 Philippine Offshore Gaming Operators (POGO) licenses, more developers are shifting some of their projects to cater to foreign and local employees of the gaming industry.
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Unique and Value-Added Concepts
The idea of “township” projects continue to be a hit in the property market, with these self-contained districts promising more value for the buyer’s investment with the addition of more amenities which are just within reach. Living in townships promises one solution to the perennial traffic woes, aside from the healthy and balanced lifestyle these projects advocates.
Mixed-use project concepts and green development, which have recently been widely applauded as a standard of development, are apparently ways by which developers can address some environmental and ecological issues.
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Bringing More Developments Outside Metro Manila
The government’s “Build Build Build” program has allotted $180 billion budget for its infrastructure projects for roads, bridges, airports, railways, and rapid bus transits. This has driven many real estate developers to go into countryside investments all over the country, where the demand comes from end-users. Aside from residential developments, industrial parks, townships, retail establishments, office spaces, and hotels continue to rise as developers take advantage of government’s initiative aimed at improving economic opportunities outside the metro and decongesting the city.
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Tapping the OFW and Foreign Market
The high dollar exchange rate is beneficial to the country’s OFW’s who constitute a big market for their housing requirements. Furthermore, developers can also take advantage of the relaxation of foreign ownership restrictions on retail and construction by eyeing foreign markets.
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Benefitting from Close Ties with Asian Neighbors
Strong ties with countries like China and Japan have encouraged joint partnerships in real estate development. A good example is Federal Land’s Season residences in BGC which is a joint venture with Japanese real estate companies, and which has made use of an earthquake technology for safety. Aside from the influx of capital, the real estate industry can also benefit from the advanced technology of their venture partners.
Like any business, the real estate industry is not immune to pressing issues that impact on its growth. However, you will be surprised at how strategy and vision may even turn some of these threats into opportunities.
