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The Philippines is catching up with the rest of the world when it comes to investing. In the country, one of the recommended forms of investment is real estate for its favorable returns. Before one can invest in real estate, however, it is important to know the different avenues for investment–and know which of them has positive yields in the near future.
These were some of the topics discussed in “Changing Face: Uncovering Alternative Ways to Invest in Real Estate” from The Outlook: Philippine Real Estate Conference 2019 held last October at the Makati Shangri-La and co-presented by Philippine Daily Inquirer Property and Holcim Philippines. The track zeroed in on what’s driving investor demand, the new investment opportunities available in the market, and how the market can tap into these to encourage a robust real estate economy.
The moderator was Danie Laurel, News Anchor of Cignal TV’s One News. Panelists include Richard Raymundo, Managing Director of Colliers; Mikko Barranda, Associate Director of Leechiu Property Consultants Inc.; Iluminada Sicat, Assistant Governor of Bangko Sentral ng Pilipinas; and Noel Rapadas, Senior Vice President and Chief Finance Officer of Torre Lorenzo.
Always an All-time High
According to moderator Laurel, everyone agrees that real estate is a good investment, especially in the Philippines. The big question now is: To what extent are real estate prices sustainable? This sparks an inquiry into the sustainability of investments and the growth areas that Philippine investors need to explore to get the most of their money.
Asked whether there will be dire consequences if POGO companies pull out, Raymundo responded by taking a look back into the BPO market. “The BPO market used to take up about 60% of the market before POGO,” he said. Now, they are down to 30-40%.
The slack that was left from the BPO industry was taken up by POGO. However, if POGO did not come into the Philippines, the rents would have corrected anyway, he added.
Barranda also mentioned that “POGOS are here and here to stay.”
Citing Bonifacio and the Bay Area, where most locators are POGOs, he said developers take advantage while POGOs are here. And with a set-up like this, the Philippines can be considered as “always at an all-time high.”
Rapadas also agreed that the Philippines has reached an all-time high. However, there is still a long way to go for it to be sustainable. According to him, in terms of benchmarking and the price of real estate, one of the reasons the Philippines is an ideal destination for foreign investors is because “we’re still cheap” compared to our neighbors.
Timing is Everything
POGOs came to the Philippines at an opportune time–three years ago, when they entered, lots of developers were finishing their projects, which added to the leasable areas in some of the now-famous POGO hubs in the country.
Sicat, however, shared that the Philippine economy does not necessarily need POGO. “We did an assessment of the impact of POGOs on the price of our residences. There was a sudden increase in the price of rent, but if you look at the net contribution of POGOs, it’s not that big, actually.”
The survival of the real estate sector, then, does not rely on POGOs, and given the current numbers of the Bangko Sentral ng Pilipinas, “it’s not big enough to contribute much to our GDP.”
BPO and POGO businesses have similarities in the way they conduct their business, shared Sicat. Their presence in the country “added pressure” on lease rates, which is enough for the industry leaders to hope they continue to conduct their business in the Philippines. However, there is a need for balance in maintaining a good source of income for the country and having these “guests” observe Philippine rules.
Be Vigilant and Diversify
Veering away from the subject of POGO, experts suggest investors follow a plan to see measurable results.
The Philippines is one of the largest markets in Asia. When it comes to sustaining prices, however, the country has a long way to go. It is important that investors are vigilant when it comes to the prices of real estate, and to diversify their portfolio to protect their investments.
“We have to understand the drivers of prices,” Rapadas added. “It’s about demographics and economic growth.”